After waiting for more than one year, China’s most prominent game developer Tencent (TCEHY) has finally received a new gaming license. Nanjing Wangdian Technology, a Tencent subsidiary, has received the license for Health Protection War, a game based on health education. The approval, which reflects the easing of China’s regulatory environment, comes as a sigh of relief for game publishers.
The National Press and Publication Administration (the Chinese regulator for games) stopped providing new gaming licenses last year due to the growing addiction, giving a blow to Tencent and other major game publishers.
What Does Tencent Do?
Tencent is a leading internet and tech company. It develops social games and offers services like long-form video, music, news, music, payment, and a mobile browser.
China’s Regulatory Environment Is Improving
During the Q2 conference call, Tencent’s President Martin Lau stated, “We believe that the regulatory environment in China is progressing from rectification to normalization gradually, which should bode well for the industry over time.”
He added, “For games, we believe the issuance of new Banhao [game monetization licenses] should help the overall industry renew growth over time. We expect to receive Banhao in the future, which should benefit our domestic game business.”
Besides for Tencent, NetEase (NASDAQ:NTES) has also won a gaming license. Overall, China has approved 73 games.
Bottom Line
While an improving regulatory environment is a positive for Tencent stock, COVID-led uncertainty in the domestic market and macro weakness in China could play spoilsport.
Nevertheless, hedge funds are optimistic about Tencent’s prospects. They bought 1.3M TCEHY stock in the last quarter. Further, TCEHY stock sports an Outperform Smart Score of nine out of 10 on TipRanks.
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