Tencent Holdings' market value slumped by around $20 billion on Friday after China intensified a crackdown on online gaming citing rising levels of myopia, heightening regulatory risks for companies in the world's biggest gaming market.
China's education ministry, in a notice late on Thursday, directed the publishing regulator to limit the number of new online video games, take steps to restrict the time young people spend playing games and explore an age-appropriate system for players.
Beijing's directive was included in a document published on the website of the ministry outlining how China should respond to worsening rates of myopia, or near-sightedness, among young people, and blamed the spread of mobile phones and other electronic devices partly for it.
The curbs are the latest challenge for Tencent, China's largest gaming and social media firm, which earlier this month blamed a freeze on new game approvals for the technology giant's first quarterly profit fall in nearly 13 years.
Shares of Tencent, which has a market value of around HK$3.25 trillion ($414.12bn), fell as much as 5.per cent, leading a slide in Chinese video game companies. It closed down 4.9 per cent. The main Hang Seng Index ended 1 per cent lower.
Tencent has lost more than $160bn in market value from its peak in January, chiefly on regulatory uncertainty, and now trails arch rival Alibaba Group to be Asia's second-biggest listed company by market capitalisation.
The massive plunge in its market value compares with Netflix's current market capitalisation of $162bn.
Tencent did not immediately respond to a Reuters request for comment.
Beijing's sometimes abrupt and haphazard regulatory measures have clouded the outlook for mobile games.
In July last year, Tencent announced plans to limit play time for some young users of its fantasy role-playing game "Honour of Kings", responding to complaints that children were getting addicted to the popular mobile offering.
The limits came around the same time as Tencent drew scrutiny from China's communist party mouthpiece, the People's Daily, which described "Honour of Kings" as poison and called for tighter regulatory controls of online games.
The rising level of myopia cases in China has drawn attention from the highest levels.
China's leader Xi Jinping had earlier addressed the high incidence of myopia amongst China's youth, saying governments at all levels should implement comprehensive and effective schemes to prevent and treat this problem, the official Xinhua news agency reported on August 28.
"All sectors of society should respond to this issue," President Xi was quoted as saying by Xinhua.
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More than 450 million of China's 1.37 billion population suffer from myopia, with the condition increasingly affecting children, according to statistics announced at a National Health Commission conference in June.
The document published on the education ministry's website on Thursday blamed the high levels of myopia on a heavy study load, the spread of mobile phones and other electronic devices, and a lack of outdoor activities and exercise.
It called on parents to limit the amount of time their children spend using mobile phones and other electronic devices and recommended children spend over an hour outdoors every day.
Analysts said while the regulatory overhang could put pressure on game-related shares, top developers will be less impacted.
"We expect leading developers to show relative resilience by lengthening lifecycle of existing game franchise and expanding overseas presence," Jefferies said in a research note.
It estimated Tencent accounted for 42 per cent of China's mobile game market share in 2017.
Founded in 1998, Tencent's main business is video games but the company also runs China's dominant social network, WeChat, with more than 1 billion users.
Tencent founder Pony Ma is now ranked 21 on Forbes' rich list, with a net worth of $38.3 billion, just ahead of Alibaba's Jack Ma with $38.2 billion.
"I think appropriate regulatory measures can better help the market concentrate its resources, raise barriers to entry and not waste resources. These are the good aspects of the policy," said David Ng, head of Super Generation Investment, which owns the EDG e-sports team.
"But we hope these restrictions won't cause the industry to go backwards."
Tencent's stock decline tracked a 7 per cent fall in shares of China-based Netease and a 6 per cent slide in Chinese online game developer ChangYou in the United States.
In Shenzhen, shares of YOUZU Interactive fell 7.6 per cent, Ourpalm slid 7.3 per cent, Tangel Publishing lost 4.5 per cent and Focus Media shed 1 per cent. ($1 = 7.8480 Hong Kong dollars)
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
The biog
Hometown: Cairo
Age: 37
Favourite TV series: The Handmaid’s Tale, Black Mirror
Favourite anime series: Death Note, One Piece and Hellsing
Favourite book: Designing Brand Identity, Fifth Edition
Email sent to Uber team from chief executive Dara Khosrowshahi
From: Dara
To: Team@
Date: March 25, 2019 at 11:45pm PT
Subj: Accelerating in the Middle East
Five years ago, Uber launched in the Middle East. It was the start of an incredible journey, with millions of riders and drivers finding new ways to move and work in a dynamic region that’s become so important to Uber. Now Pakistan is one of our fastest-growing markets in the world, women are driving with Uber across Saudi Arabia, and we chose Cairo to launch our first Uber Bus product late last year.
Today we are taking the next step in this journey—well, it’s more like a leap, and a big one: in a few minutes, we’ll announce that we’ve agreed to acquire Careem. Importantly, we intend to operate Careem independently, under the leadership of co-founder and current CEO Mudassir Sheikha. I’ve gotten to know both co-founders, Mudassir and Magnus Olsson, and what they have built is truly extraordinary. They are first-class entrepreneurs who share our platform vision and, like us, have launched a wide range of products—from digital payments to food delivery—to serve consumers.
I expect many of you will ask how we arrived at this structure, meaning allowing Careem to maintain an independent brand and operate separately. After careful consideration, we decided that this framework has the advantage of letting us build new products and try new ideas across not one, but two, strong brands, with strong operators within each. Over time, by integrating parts of our networks, we can operate more efficiently, achieve even lower wait times, expand new products like high-capacity vehicles and payments, and quicken the already remarkable pace of innovation in the region.
This acquisition is subject to regulatory approval in various countries, which we don’t expect before Q1 2020. Until then, nothing changes. And since both companies will continue to largely operate separately after the acquisition, very little will change in either teams’ day-to-day operations post-close. Today’s news is a testament to the incredible business our team has worked so hard to build.
It’s a great day for the Middle East, for the region’s thriving tech sector, for Careem, and for Uber.
Uber on,
Dara
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
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- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
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- Disruption Lab and Research Centre for developing entrepreneurial skills
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
