Chinese gaming firms reveal share buybacks after regulatory move unnerves investors According to Reuters

© Reuters. FILE PHOTO: “Game for Peace,” Tencent’s alternative to blockbuster video game “PlayerUnknown’s Battlegrounds” (PUBG) in China, is seen on a mobile phone in this illustration picture taken May 13, 2019. REUTERS/Florence Lo/Illustration/File Photo

Li Gu and Casey Hall

SHANGHAI (Reuters) – A host of smaller Chinese gaming companies have announced share buybacks – plans seen as an attempt to calm investors after the market was spooked by regulatory moves to curb consumer spending on games.

Last Friday, regulators published draft rules that would ban online games from giving players rewards if they log in every day, if they spend in-game for the first time, or if they spend in-game multiple times in a row. These are all common motivational mechanisms in online games.

That sent shares of game companies plunging, and on Monday night eight companies unveiled plans to buy back shares worth a total of up to 780 million yuan ($110 million), citing confidence in China’s gaming industry and the need to protect investors.

The buyback announcement comes on the heels of an apparent softening of China’s video game regulator – the National Press and Publications Bureau – which issued a statement on Saturday that the government would further refine the proposed rules after “seriously studying” public opinion.

And on Monday, it approved new licenses for 105 domestic online games for December, a move that some analysts said “strongly demonstrated” that authorities continue to support online game development.

At best, buyback plans have served to stabilize stock prices.

Among them, Shanghai-listed G-bits Network Technology Xiamen saw shares rise 3% by Tuesday afternoon after losing 13% over the previous two trading days. Perfect World Co fell about 2% on the Shenzhen Stock Exchange after falling 14% over the past two days.

The publication of the draft rules raised fears that regulators are once again cracking down on the sector. The industry only returned to growth this year after the end of extended curbs in 2021 and 2022.

It remains to be seen how shares of Tencent Holdings (OTC: ), the world’s largest gaming company, and its closest rival, NetEase (NASDAQ: ) , will fare this week following an apparent softening of the regulator’s stance.

The two Hong Kong-listed firms lost a combined $80 billion in market value on Friday. Hong Kong markets were closed for the Christmas long weekend and will reopen on Wednesday.

($1 = 7.1422 )