A child is pictured as he plays Tencent’s Honor of Kings. The Economic Information Daily, affiliated to China’s biggest state-run news agency Xinhua, had cited Tencent’s “Honor of Kings” in an article in which it said minors were addicted to online games and called for more curbs on the industry. File photo.
A child is pictured as he plays Tencent’s Honor of Kings. The Economic Information Daily, affiliated to China’s biggest state-run news agency Xinhua, had cited Tencent’s “Honor of Kings” in an article in which it said minors were addicted to online games and called for more curbs on the industry. File photo.

Naspers shares dive after Chinese state media says gaming is ‘spiritual opium’

By Edward West Time of article published Aug 4, 2021

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NASPERS and subsidiary Prosus slid more than 5 percent yesterday in tandem with a 10 percent slide in Naspers’s biggest investment, the Hong Kong-listed internet group Tencent Holdings.

Tencent’s share price had slumped after a China official news agency publication decried the “spiritual opium” and “electronic drugs” of online games, which generated fear in the market that Beijing would again tighten controls over online entertainment, following last week’s curbs on other online business.

Naspers’s share price fell 5.8 percent to R2 635.56 yesterday afternoon, while Prosus’s price was down 7.7 percent to R1 214.73.

Tencent, according to Reuters, said it would further curb minors’ access to its flagship video game, hours after its shares were battered by the China state media article.

The Economic Information Daily, affiliated to China’s biggest state-run news agency Xinhua, had cited Tencent’s “Honor of Kings” in an article in which it said minors were addicted to online games and called for more curbs on the industry.

“Tencent’s efforts over the past three years to reduce the play-time of younger gamers and enhance content controls may insulate them from another round of regulatory scrutiny on China’s online game sector, in our view,” said Bloomberg Intelligence analyst Matthew Kanterman, although he said this might also increase short-term costs because of the roll-out of systems in games to prevent younger players from accessing inappropriate content.

Naspers’s share price has fallen more than 30 percent since its share peaked this year in February, while Tencent’s price has fallen more than 31 percent on the same basis.

Last week, Tencent’s and Naspers’s shares also fell heavily after China announced the banning of online education by private companies, the latest in a series of curbs being imposed on China’s biggest tech companies over the past nine months.

In July, China ordered more than two-dozen tech companies to carry out internal inspections and address issues such as data security.

Flagship Asset Management Fund Manager Kyle Wales said they believe the eventual outcome of recent announcements by the China government, last week about online education and this week about online gaming, would be less severe than initially thought.

He said this was because after both announcements, the China government issued statements, the latest yesterday, which sought to “back-pedal somewhat” on what had initially appeared about the regulatory tightening.

“The longer-term fundamentals relating to China remain robust, more so than other emerging markets,” said Wales.

Anchor Capital analyst Mike Gresty said in a note that Naspers’s investors faced a difficult decision whether or not to tender their shares for Prosus shares, in terms of the Naspers/Prosus restructuring plan to reduce the discount to net asset value at which Naspers trades.

“For South African investors who have a high Naspers concentration in their portfolios, exposing them to the unpredictability of Chinese regulation, as demonstrated by recent experience, the question needs to be asked whether this risk is justified by the avoidance of tax alone. With many more ways to gain investment exposure to the technology investment theme currently, this exchange offer may provide an opportunity to reduce risk and take advantage of these,” he said.

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