HONG KONG (Nikkei Markets) -- Shares of Tencent Holdings fell for a second day after its games failed to appear in a new list of titles approved by Beijing, heightening concerns about the recovery in the company's money-spinning division.
China's broadcasting regulator on Tuesday approved the release of another round of video games, the third such batch after it lifted a freeze in December. Approvals for new games were halted in March last year due to concerns about the growing addiction among the nation's youth. So far, the State Administration of Press, Publication, Radio, Film and Television has approved more than 230 titles.
However, titles from Tencent, whose Honour of Kings ranks among China's most popular mobile games, were again absent from the list as were those from Nasdaq-listed Chinese internet company NetEase.
China is the world's largest video games market, according to gaming market researcher Newzoo. Tencent, which dominates social media with its wildly popular WeChat app, had a gaming market share of about 52.4% in the October quarter, according to Chinese consulting firm iResearch.
Shenzhen-based Tencent has seen growth take a hit in recent quarters amid a slowdown in its gaming business due to the freeze. Last year, in a show of good faith, it said new players would require proper identification to register so that it could identify minors.
The resumption of approvals does not necessarily mean the game market will return to the fast-growth track, Connie Gu, an analyst at Bocom International, said in a note. Gu said she sees continued pressure on Tencent and NetEase's mobile game revenue in the short term.
Tencent shares fell 1.1% to HK$332.20 ($42.34) in late afternoon trading on Wednesday, extending Tuesday's 1.2% slide. By comparison, the benchmark Hang Seng Index was down less than 0.1%.
The stock crashed 47% between its peak in January 2018, when it hit a record HK$474.60, and its October low of HK$252.20. In the process, it lost more than $250 billion from its market capitalization.
For the third quarter ended October, Tencent reported a 24% increase in revenue, helped by its advertising segment and a surge in revenue from other businesses such as payments and cloud computing.
Gaming revenue, however, continued to slow, with that from personal-computer titles declining 15% from a year ago. Meanwhile, mobile gaming revenue edged up just 7% as against the heady pace of 84% in the year-ago quarter.
The regulator's approvals are likely taking place in chronological order, analysts at Daiwa Capital Markets and Morgan Stanley wrote in reports last week. Morgan Stanley expects Tencent and NetEase to secure license approvals "in the coming batches," while Daiwa expects that to happen during the first quarter.
Jefferies said it expects a gradual step-up of monthly game approvals in March and April, adding that the regulator would need time to digest the backlog accumulated during the freeze.
Nevertheless, some remain concerned that the delay may affect Tencent's outlook for 2019. The company is expected to report results for its December quarter and full year in March.
Andy Wong, chief investment strategist at Harris Fraser (International), argues otherwise. The approvals may not have much impact as investors expect more support from the company's other businesses, he said.