Chinese tech stocks fall as Tencent shuts down game streaming site

Chinese tech stocks fell for a third day as Tencent Holdings Ltd. to shut down its game streaming service further hurt sentiment in an industry already bogged down by regulatory risks.

The Hang Seng Tech index closed down 1.2% on Friday, after losing as much as 3%. Video streaming company Bilibili Inc. and Tencent provider GDS Holdings Ltd. were among the worst performers. Meituan also weighed in on the gauge, following the announcement of Sequoia Capital’s stake cut.

Tencent’s move comes more than a year after Beijing blocked a merger between its holdings, an entity into which the soon-to-be-shutdown Penguin Esports platform would have been integrated. Chinese tech stocks hit a record low in mid-March but have yet to stage a sustained rally amid regulatory risks.

“The shutdown of Penguin Esports or any other service will strain cloud, data services demanded by Tencent, affecting providers like GDS,” said Ivan Chow, chairman of Imperial Financial Group.

Shares of live-streaming platforms led U.S.-listed Chinese stocks lower on Thursday, with the Nasdaq Golden Dragon China Index closing down 4.5%.


Investors remain cautious about the fragile tech sector after the year-long rout, with stocks recently hit after Beijing’s crackdown on tax evasion from the live-streaming sector. Even though Chinese officials have repeatedly promised to add stimulus and stabilize markets, that has done little to allay concerns about the fallout from rising U.S. interest rates, other risks.

On Friday, China’s regulator announced it would launch a campaign through early December to crack down on internet companies’ algorithm violations, warning that high-influence websites and platforms will be targeted.

The announcement appears to ensure that tech companies are transparent with consumers about the data they collect to protect privacy, said Wai Ho Leong, strategist at Modular Asset Management.

But with some apps already offering users the ability to opt out of personalized push services, “the spirit of these regulations and the inevitable inspections and audits were perhaps expected since the start of this year,” he said.

Meanwhile, the broader Hang Seng index reversed its losses to gain 0.3%, led by a rally in real estate and financial stocks. China’s benchmark CSI 300 index ended up 0.5%.

© 2022 Bloomberg

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