Naspers, Prosus crash as China hits pause
Prosus, which houses Naspers’s global internet business, including a nearly one-third stake in Tencent, had its worst day in more than a month on Thursday after reports that Chinese regulators are stepping up efforts to limit online gaming.
The South China Morning Post, citing unidentified people, reported that regulators told Chinese tech firms that approval of new games is to be suspended. This was during a meeting at which their focus on profit was questioned.
Naspers slumped as much as 8.3% and Prosus 7.5%.
Since August 3, when markets reacted to Chinese state media describing gaming as “spiritual opium”, the Naspers stable has had about R300bn of its value wiped out, almost equal to the market cap of SA’s most valuable bank, FirstRand.
Vestact CEO and founder Paul Theron said it was “another painful day” for shareholders. “There is not much that Naspers /Prosus shareholders can do other than hold on grimly and hope the communists in Beijing calm down at some point.”
The news is the latest blow for Tencent, which gets about 31% of its revenue from gaming and was also hit in 2018 when authorities demanded action in tackling nearsightedness.
In July, the competition authorities ordered Tencent to stop exclusive music licensing deals and levied a small fine after similar action against other firms.
Prosus was down 6.3% to R1,240.72 by the close of trade, and Naspers 7.82% to R2,429.36. Tencent closed 8.48% lower in Hong Kong; it has gained 1% since August 3 but has lost 10% since being ordered to give up exclusive licensing rights.
Since July 23, R566bn of
Naspers and Prosus has been wiped out, the combined worth of FirstRand and Standard Bank.
Chinese authorities reportedly summoned Tencent and peer NetEase to discuss their focus on profits, amid efforts to limit the amount of time children spend playing video games. Chinese firms also face regulatory moves in areas such as social media, online finance and commerce, including antimonopoly and antipollution measures.
China has characterised the moves as a necessary step in its push for a development philosophy that is people-centred, which Chinese Communist
Party general secretary Xi Jinping has emphasised.
China’s ambassador to SA, Chen Xiaodong, wrote in a Business Day article that the measures are meant to curb the monopolistic power of large tech players, in line with similar action in the US, Europe and SA.
Oanda senior market analyst Jeffrey Halley said in a note the regulatory developments generally dampened spirits for Asian trade on Thursday. “I continue to believe that buying the dip in China equities is only for the wildly optimistic or the very nimble.”