Tencent Shares See Bloodbath on Fears China Will Tighten Internet Crackdown

Shares in China's Tencent Holdings plunged 10 percent on Tuesday in the wake of renewed concerns that Beijing will intensify the crackdown on Internet companies. The market crash happened after an official news outlet said online games are 'spiritual opium'.

Chinese regulators have been harsh on huge Internet corporations like Alibaba, Tencent, Meituan and Didi in recent weeks. Tuesday's sell-off also affected other technology platforms like NetEase Inc. and XD Inc. , Bloomberg reported.

State Media Demands Strict Crackdown

Launching stern criticism of the gaming industry, China's Economic Information Daily demanded stricter controls over the time people spend on games.

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Visitors use their smarts phones underneath the logo of Tencent at the Global Mobile Internet Conference in Beijing 6 May 2014 (Kim Kyung-Hoon/Reuters)

"No industry, no sport, can be allowed to develop in a way that will destroy a generation," the article said, Reuters reported. The article said online games are like "electronic drugs".

The article specifically mentioned Tencent's flagship game Honor of Kings, which is seen as the most popular online game among Chinese kids, causing a bloodbath in the companies Hong Kong listed shares.

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A floor trader monitors share prices during afternoon trading at the Hong Kong Stock Exchange in Hong Kong, China. Reuters

Tech Behemoths Suffer

China's relentless crackdown on its technology industry has led to whopping value erosion at a clutch of leading tech behemoths. According to data from Goldman Sachs, major Chinese tech companies listed overseas have lost more than $1 trillion in value since the start of February.

Leading the pack is technology pioneer Tencent, which has lost more than $100 billion from its market value in the last two days, making it the world's biggest stock loser in July.

In single day last week, Tencent, founded by Pony Ma, nosedived 23 percent. According to Bloomberg, the company lost about $170 billion in market value during the month, marking 'fastest evaporation of shareholder wealth worldwide during this period'.

The Chinese sentiment is also impacting Japanese gaming companies. Shares of Nexon, which garners nearly 28 percent of its revenue from China, fell as much as 8 percent.

Top Ten Stock Losers

Of late, China has been keenly taming the mammoth corporations like Alibaba and Tencent as regulators became increasingly concerned about the potential risks these corporations raise for the country's data security, financial stability and competitiveness.

Tencent owns China's mammoth messaging service WeChat besides owning a host of internet businesses, financial services companies and gaming products.

According to Bloomberg, nine of the top 10 losers in shareholder value in July are Chinese companies. The other prominent losers apart from Tencent are Meituan and Alibaba Group.

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