China’s video game curbs send shivers through stocks worldwide

China’s raft of new measures limiting players’ spending on video games sent ripples through stock markets across the globe on Friday.

Prosus NV fell as much as 20 per cent in Amsterdam trading, erasing €15.5 billion ($17.1 billion) of market value at one point, after the regulator’s draft rules dealt a blow to the value of the company’s holding in Chinese internet giant Tencent Holdings Ltd. South African parent Naspers Ltd. also slumped by a fifth.

In Hong Kong, Tencent — in which Prosus holds a 25 per cent stake — closed down 12 per cent. In New York, the Nasdaq Golden Dragon China Index of US-listed Chinese stocks declined 2.4 per cent, with video-game maker NetEase Inc. leading losses.

Ubisoft Entertainment SA, which Tencent invests in, fell as much as 8.3 per cent in Paris trading, while US peer Unity Software Inc. also declined.

China’s gaming regulator on Friday published draft rules aimed at clamping down on practices that encourage players to spend more money or time in online games. A sweeping set of curbs on in-game rewards for frequent log-ins and purchases stoked fears of another industry crackdown in the world’s biggest mobile gaming arena.

Prosus’s share-price slump shows that it’s sensitive to factors outside of its influence, according to Bloomberg Intelligence analyst John Davies. Its Tencent stake “casts a shadow over its other investments, and appears unlikely to change soon,” he said.

Prosus’s stock performance is closely linked to that of Tencent, given that three quarters of its sum-of-the-parts value lies within the Chinese conglomerate. The Dutch firm counts on Tencent as its biggest investment in a wide-ranging portfolio of technology stocks.

Prosus has been trimming its investment in Tencent for more than a year to fund a buyback program. The company said earlier this month that its ownership dropped below 25 per cent.

In Johannesburg, local benchmark the FTSE/JSE Africa All Shares Index declined as much as 1.8 per cent, with Naspers and Prosus the biggest drags on the market.

Meanwhile, for Chinese equities, this year’s underperformance has turned from bad to worse. Friday’s decline deepens the Golden Dragon Index’s 2023 drop to about 8 per cent, well behind the Nasdaq 100’s 54 per cent gain.

“In a way it is a fitting end for a year that has severely disappointed China bulls,” said Rajeev De Mello, a global macro fund manager at GAMA Asset Management. “The performance gap between US and China equities is staggering.”