Chinese Gaming Firms Announce Share Buybacks Post-Regulatory Shake-Up: Will Tencent, NetEase Stocks Rebound?

In response to investor worries following market disruptions due to regulatory measures, several smaller Chinese gaming companies have announced plans to buy back shares.

According to Reuters, the move is aimed to reassure investors following draft rules announced by Chinese regulators on Friday. These rules proposed restrictions on certain incentives in online games, causing a sharp decline in gaming company shares.

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The proposed regulations, intended to ban various common incentive mechanisms, triggered a market downturn. In response, eight companies disclosed plans for share repurchases totaling 780 million yuan ($110 million) combined, emphasizing their confidence in China's gaming industry and the need to safeguard investor interests.

Following a statement on Saturday by China's video game regulator, the National Press and Publication Administration, indicating a more flexible approach to proposed rules after considering public opinions, several gaming firms announced the share buybacks. On Monday, the approval of 105 new domestic online game licenses for December by the regulator was seen by analysts as a strong indication of the government's continued support for the online gaming industry.

However, despite the buyback announcements stabilizing some share prices, companies like G-bits Network Technology Xiamen and Perfect World Co experienced fluctuations, with declines since the draft rules' publication.

This regulatory move sparked concerns of renewed strict scrutiny after the gaming industry had just begun recovering from a previous clampdown in 2021 and 2022.

The market awaits the impact of the new rules on Tencent Holdings Ltd TCEHY and NetEase Inc NTES, major players in the gaming sector, following their combined $80 billion market value loss on Friday.

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