Tencent shares dive on earnings miss, gaming worries

A weaker yuan makes Chinese exports cheaper cushioning the impact of the tariffs imposed by US President Donald Trump

Of that, the revenue from PC games was CNY31.5 billion, a first-time decline, while mobile game income rose 13 percent from a year earlier, but this was a big drop from last year's increase of almost 50 percent. In a report via TheStar China has effectively put a temporary ban on all new game releases due to a massive shakeup in the censorship agency.

Despite the current suspension of game approvals, Lau said Tencent believes the situation is "not a matter of whether [new games] will be approved for monetisation, but a matter of when exactly".

Deutsche Bank analysts led by Mr Kim Han-joon now expect a 6 per cent drop in mobile gaming revenue in the second quarter from the first, instead of their original forecast for a rise of the same magnitude. Although gaming revenue made up 40 percent of the revenue, it is also the business line that is causing the financial woes.

"China's whole online gaming industry is having some issues - not only because of regulation but also because Chinese gamers are becoming more mature and selective".

Bloomberg News reported Wednesday that China had stopped approving any new mobile games as part of a wider shake-up of the market.

Reporting a 2 percent decline in second-quarter net profit as well as its slowest revenue growth in three years, Tencent said the biggest hurdle to a return to rapid revenue growth was that it could not yet charge for its PlayerUnknowns' Battlegrounds (PUBG) video game in China. It said it cashed out of startups such as Ele.me and Mobike to raise capital to bankroll new services such as game live-streaming and in traditional retail. It's looking like the reason behind China's games license freeze is similar.

"If they previously didn't get an approval, it seems that there will continue to be a hold on that".

Why it's important: China's entertainment industry has increasingly been at odds with regulators in recent months.

Shares in Tencent, which is set to report half-year earnings on Wednesday, closed down 3.4 percent, against a 0.7 percent fall in the benchmark Hang Seng share price index.

Hirokazu Koreeda's Shoplifters is reported to have extended its theatrical run in China to October 2. The country's cryptocurrency and peer-to-peer lending industries also soared to become the biggest in the world - only to be squashed by government intervention. The Chinese government has issued a full ban on games developed by South Korea since past year.

Alibaba Group Holding, which competes with Tencent across a number of businesses, is the parent company of the Post.

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