China’s media regulators have ended a nine-month freeze on the approval of new video games in the $30 billion Chinese market.
Global industry (and Chinese market leader) Tencent Holdings (TCEHY) didn’t have a title among the 80 new games approved, but the end of the freeze is good news for Tencent, which reported its first drop in profit in a decade thanks to the ban on new games.
Tencent shares finished 2018 down 23.98% for the year, but it looks like the stock may have bottomed on October 29 at $32.15. Since then the shares are up 22.8% even as the Chinese stock market continues to suffer through a very extended bear market.
Regulators at the State Administration of Press, Publication, Radio, Film and Television had instituted the ban as part of a government campaign to fight gaming addiction. (The freeze also coincided with a shift in regulators, leading overseas analysts to wonder if the freeze was part of a bureaucratic turf battle.)
Tencent has cut its marketing budget during the freeze in an effort to conserve cash. It’s biggest problem–and biggest opportunity–comes from the company’s global profile. Tencent has been unable to market overseas blockbusters like Fortnite and Battlegrounds during the freeze, but with the end of the freeze, some of these titles are expected see the Chinese market soonish.
Tencent Holdings is a member of my long-term 50 Stocks Portfolio
