If you think about places in the world to gamble, Las Vegas comes up because it is in the US but so does Macau. All the big names you see in Las Vegas are in Macau which caters to the Chinese gambling market. It is not surprising to see gaming stocks as some of the most active on the Chinese and Hong Kong Stock Markets.
In an article by Jose Ye of Reuters, the biggest gaming company in China – Tencent reported a quarterly profit halved from a year ago and revenues stagnating. The company blamed a variety of events including cuts in advertising spending by consumers, e-commerce and travel business. The other factor was the Chinese government regulatory crackdown to lower the influence of large internet companies.
Even though the stock is down by over 50%, Tencent remains China’s most valuable company.
In recent months, China shut down many of its cities for health reasons dealing with COVID, however Tencent President Martin Lau believes the government is now encouraging the tech companies as China’s growth rate has been the lowest rate in years.
In the gaming side of business, Tencent big names are Honor of Kings and Call of Duty Mobile. New games are the lifeblood of a company and for 6 months China has not issued game licenses, however Mr. Lau expects that to change soon and has new games under development.
The regulatory concerns were the Chinese government believed too many people under the age of 20 were gambling through games and impose a strict program to ensure young people did not game. Tencent has turned to the overseas market to make up for lost revenue.
Linking to dividend paying stocks, in many countries some companies tend to be favored by the government through regulatory and administrative abilities. In many cases, profitable companies fall into the category, as an investor you need to see that companies can navigate through both sides of the aisle governments. As an individual you can pick sides, as an investor you want the company to be neutral in the government but willing to accept handouts.
There are more questions than answers, till the next time – to raising questions.