Tencent buybacks hit record in December after China watchdog roils markets

TENCENT Holdings bought a record HK$10 billion (S$1.7 billion) of shares in December when China’s gaming regulator surprised investors with a raft of new regulations that triggered a broad tech sell-off.

China’s most valuable company sharply accelerated its pace of purchases as the shock announcement triggered a 12 per cent plunge on Dec 22. Tencent has since ramped up its pace of daily purchases to about HK$1 billion, compared with an average of HK$375 million a day last year prior to the sweeping restrictions.

The controversial regulations, which encompass caps on in-game spending and a ban on rewards for frequent log-ins, revived fears that the country was reverting to a 2021-style crackdown on the Internet arena.

While Beijing has since sought to contain market damage, reportedly sacking a top official who helped oversee the sector, Tencent remains about 4 per cent below where it was before the new rules were proposed.

Some industry watchers argue that the watchdog’s intent was consistent with years-long efforts to police content and gaming. Tencent and rivals such as NetEase already labour under some of the world’s strictest constraints, from limits on playing time for minors to censorship.

Still, for many investors who remain traumatised by a spate of abrupt rules and guidelines that crippled sectors from e-commerce to entertainment in 2021, the latest incident has only reinforced the notion that China’s policy unpredictability remains a big risk.

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Tencent spokespeople did not immediately respond to e-mail and text message queries from Bloomberg for this story.

The latest gaming restrictions caught industry players and investors off-guard on the final trading day before Christmas, exacerbating the fallout and triggering a sell-off in gaming stocks worldwide.

The episode underscores the challenge facing President Xi Jinping as he looks to revive an economy struggling to arrest a slide in the property sector, while maintaining control of a vast and powerful tech sector.

Tencent, the largest Chinese company by market value, is considered crucial to reviving the world’s No 2 economy.

Tencent fell 0.7 per cent before trimming losses on Thursday, while a Hang Seng gauge of Chinese tech shares lost 0.8 per cent.

“If you look at the market, the valuation in the market for China Internet stock is almost at historic lows,” Tencent president Martin Lau said on the company’s most recent earnings call. “At this point, buyback will be a more favourable means for our shareholders than other means.” BLOOMBERG