4 min read

Asia Tea Time - Cup 39 ☕

This week I talk China’s new proposed gaming restrictions, our money new year’s resolutions, and coffee shop chains.

Also, in case you missed it, here's some money tips I've shared recently:

Macro in Asia

Tencent shares make up ground after new gaming regulations announced

Tencent shares, along with the share prices of other big Chinese gaming firms, saw some gains on Wednesday after previously-announced gaming restrictions took a sledgehammer to the stock prices of gaming firms in China.

In response, Chinese gaming regulators attempted to backtrack somewhat by saying they would “improve the rules” by consulting with the public’s views.

Why it’s happening

  • Remember that the Chinese government has been on an industry-wide crackdown against online gaming for much of 2021 and 2022.
  • Those pesky online games promote myopia and anti-social behaviour, such as internet addiction – aspects of a society that aren’t really in line with the vision for “Common Prosperity”.
  • These new draft restrictions – including limiting the amount of time spent in a game as well as banning rewards for frequent log-ins – would pretty much destroy a lot of the profit-making strategies employed by gaming companies in China.

Why it matters

  • In the past six months or so, gaming companies have seen a resurgence of sorts as many China watchers believed the crackdown on the gaming industry was over. 
  • With Tencent as the world’s largest online gaming firm, and one of the largest companies listed on the Hong Kong Stock Exchange (by market capitalisation), the regulations in the Chinese online gaming market can have an outsized impact on general investor sentiment for broader China assets.

What’s next?

  • It will be interesting to see where the Chinese gaming industry goes in 2024 as there appears to be so much uncertainty around regulations and what they mean for the industry’s long-term viability.

Tim’s Take 

China’s gaming industry can’t seem to catch a break. In 2021, there began a sweeping crackdown on anything tech-related in the consumer space in China. 

The government’s admonishment of Jack Ma and him subsequently falling off the grid showed that the Chinese government had decided to rein in the increasingly powerful tech sector.

Beyond all this, though, the government viewed a lot of the tech innovations in China – at least with regards to consumer-facing tech – as not really aligning with its own values, particularly the much-espoused Common Prosperity. 

By declaring profits in the online education sector as illegal, it basically annihilated an entire industry within a few days.

That spooked investors at the time and drove a load of money out of China tech firms, understandably.

These new restrictions show that the government is still intent on reining in certain industries that don’t match its own vision for society.

Remember that the one thing investors hate more than anything is uncertainty and the question marks around the long-term future of gaming are building up. 

That was clear in the share price reactions when Tencent plunged 12% last week immediately after the announcement and gained back around 5% earlier this week – demonstrating that investors just don’t have that much faith in the regulator’s reassurances.

Unfortunately for anyone invested in Tencent, or any of the other big online gaming firms in China, uncertainty in the industry seems to be the one thing you can be sure of.

Tim's Money Tip of the Week

It’s coming up to 2024 and of course that means another New Year’s again. Along with that comes all those resolutions we make for the upcoming year.

While nearly all of us fail to meet the majority of the goals we set ourselves, it’s also an apt time to set out various resolutions under different categories.

For example, one area could be reviewing how well we’ve done with our financial health in 2023 – whether that’s saving, budgeting, investing or insurance – and what we could do better in the new year.

It’s better to have fewer resolutions but make them “stretch goals” so that we can work towards something that feels more like a big win when do actually achieve it.

So, for 2024, we could think about having a set of, say, five financial resolutions across various areas of our financial wellness. Happy new year to everyone and I hope 2024 is a prosperous one! 

Story of the Week

Coffee is taking Asia by storm and it appears we have another coffee chain that is coming to Singapore’s shores to see if it can crack the wealthiest Southeast Asia market.

China-based Cotti Coffee – which is the world’s fifth-largest coffee chain – is set to open its first outlet in Singapore at One Raffles Link.

Founded by the people behind Luckin Coffee (which itself opened its first outlet in Singapore only in March of this year), it’s aiming for the middle of the market in terms of pricing.

How well that works out for Cotti, with large local chain Flash Coffee recently closing down all its Singapore outlets, remains to be seen but it appears as though the coffee trend is moving fast in the region.