What’s going on?
Tencent’s stock fell by the most in a decade on Tuesday, after murmurs grew that the gaming industry would be next to fall to China’s might.
What does this mean?
The Chinese government has been on the warpath in the last few months, barreling its way through the country’s tech, fintech, and for-profit education industries to name a few. So when a state-owned news outlet accused kids of spending too much time playing “electronic drugs” – video games – investors were suddenly nervous that gaming would be next. That encouraged them to sell off a host of the sector’s stocks: Tencent’s shares dropped by 6% on Tuesday, NetEase’s by 10%, and Japan’s Nexon – which makes about 30% of its revenue from China – by 7%.
Why should I care?
For markets: This bruise might not heal.
Tencent’s shares were down as much as 11% at one point, but China’s biggest public company did manage some damage control – namely by promising to limit the amount of time kids can spend playing its games. But Alibaba – which announced weaker-than-expected quarterly results on Tuesday – is proof that this might cause lasting problems: the ecommerce giant’s shares have now fallen 25% in the last six months. Still, it’s trying to put a positive spin on the situation, committing to buying back more of its shares this year and next.
For you personally: Stay safe out there.
You might be skittish about investing in China right now, so it’s just as well that Goldman Sachs published new analysis on which sectors to avoid and which to invest in. The investment bank suggested steering clear of those exposed to antitrust, capital markets, social equality, and data security, and gravitating more toward consumer staples, energy and utilities, and machinery and materials.