Tencent shares fall after China tightens rules for young video gamers

Shares of Tencent Holdings Ltd dropped nearly 3% on Tuesday, after China announced new rules forbidding under-18s from playing video games for more than three hours a week.

Beijing said the move was necessary to stop growing addiction to what it once described as "spiritual opium".

Jefferies analysts said on Monday that they expected to see about a 3% impact to Tencent's earnings from the new rules, assuming gaming contributes about 60% of its total revenue. They also forecasted that its smaller rivals like NetEase will suffer limited impact.

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Mio Kato, an analyst who publishes on SmartKarma, said however that the market reaction "grossly underestimates" the impact of the restrictions.

"The root of the problem here is not the immediate revenue impact," he said. The problem is that this move destroys the entire habit-forming nature of playing games at an early age."

Shares in Krafton Inc, the Tencent Holdings-backed South Korean gaming company, fell 3.5%.

Tokyo-listed Nexon and Koei Tecmo, which both have exposure to the Chinese market, were down 4% and 3% respectively.

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