By Yifan Wang
NetEase Inc. shares fell in Hong Kong on Tuesday, in part due to speculation that the company's move to temporarily suspend availability of a game on PCs indicates the product has regulatory issues and could hurt revenue.
The Chinese gaming developer's stock was down 7.1% in afternoon trading at HK$165.70, putting it on pace for its biggest one-day drop in nearly three months.
Brokerage UOB Kay Hian said investors appeared to suspect that NetEase's recent decision to suspend the desktop simulator for its new Harry Potter-themed game, which it said it did to facilitate a technical upgrade, was also related to regulatory issues.
Beijing authorities earlier this year halted approvals for new games, requiring developers to first complete system upgrades to comply with new anti-addiction requirements for underage users.
The brokerage said NetEase's latest service suspension was unlikely to hurt revenue significantly, noting that the PC version of the Harry Potter game accounts for a relatively small portion of its total user base and income stream. "We believe the absence of the PC game can be mitigated by the mobile version," it said.
UOB Kay Hian has a buy rating on NetEase, with a price target of HK$213, around a 29% premium to shares' current level.
Some investors could also be moving to take profits after a run-up in the company's stock, other analysts said. NetEase is up about 25% so far this quarter, while peers including Alibaba Group Holding Ltd. and Tencent Holdings Ltd. have fallen in the same period.
Chinese tech stocks have broadly sold off in recent sessions, with the Hang Seng TECH Index losing ground for three consecutive trading days since late last week. Analysts attribute the downturn to earnings pressures for tech firms amid China's macroeconomic weakness as well as to rising uncertainty over the effects of the new Omicron coronavirus variant.
Write to Yifan Wang at firstname.lastname@example.org
(END) Dow Jones Newswires