Tencent Refutes Rumours of Impending Crackdown on Company As Shares Sink

Tencent recently denied rumours of an impending crackdown from China's regulators after a social media post about the perceived crackdown went viral.

Credit: NOEL CELIS / Contributor / Getty Images

The post containing the rumour in question was from a Xueqiu user who went by the username "Crazy Panda 233". According to their post, the Chinese government would introduce new regulations that would disrupt the company's business in the future.


Tencent's spokesperson, Zhang Jun, denied the post's claim of an impending crackdown, adding that he is not afraid to go on record while poking fun at Crazy Panda 233, who may have been a Tencent employee.


"Ask me next time. At least that's more legit," Zhang said.


However, the Shenzhen-based company recently saw its shares drop for the second time on 21 February 2022 by 5.2 per cent. Crazy Panda 233's post renewed traders' fears of more government regulations and restrictions coming in the future as it did not give specifics.

Tencent's stock wasn't the only one affected by these renewed fears. Other Chinese tech companies such as JD.com, Inc. and Baidu, Inc, saw their stocks drop by 2.4 per cent and 2.3 per cent, respectively.


The fears for more regulation followed a warning from the China Banking and Insurance Regulatory Commission (CBIRC) against using the metaverse as a tool for illegal fund-raising, fraud and virtual real estate speculation. Meanwhile, China Mobile Communications Association Metaverse Consensus Circle vowed to resist said speculative trades in the sector while advocating "the most important application scenario of the Metaverse" - serving the real economy.


However, neither the CBIRC nor the Association dropped the names of companies engaging in these activities.

It was also at this time that the Chinese government rejected Tencent's trademark application of "rhythm metaverse" for their venture into the metaverse concept. Currently, the trademark application is "pending further review", according to AASTOCKS.com.


Justin Tang, head of Asian research at United First Partners confirmed that there is concern about new regulatory reforms, adding that prior to Meituan's stock dropping by more than 15 per cent on 18 February 2022 due to government-mandated reduced service fees, there was a sense of relief. However, Tang added that "investors are now thinking that there could be more to come".


Additionally, Caster Pang, head of research at Core Pacific-Yamaichi, told Bloomberg that the market is terrified at the thought of more regulation will come and that could leave Chinese tech companies with "very little room to tun around their business". He also added that the metaverse fears shows the market's worry that tech firms may not be able to grow a new business as rapidly as they did in the past in China, which "dampens the already-fragile sentiment".

 

Written by John Paul Joaquin

 

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