The Latest Crackdown Could Actually Be an Opportunity
Yet another industry is the victim of the Chinese government’s new restrictions. But investor panic today could mean big profits tomorrow.
Over the last several months, investors have been rocked by the geopolitical turmoil in China.
Those unlucky investors who hold some of China’s largest U.S. exchange listed stocks have been on the wrong side of the Chinese government’s clampdown on a wide variety of industries.
Chief among the targets of the government has been the tech sector, which Beijing views as having expanded too fast with too little regulation.
As China has made moves to clampdown on data security risks, it’s investors that are left with the short end of the stick.
This year alone, billions of dollars of value have been erased from China’s tech giants as a result of the government’s new measures.
And yesterday, Chinese regulators set their sights on a new target.
Where’s the money?
The writing has been on the wall for a few weeks now.
In early August, a state-owned Chinese newspaper published an article criticizing the online video game industry, call it “opium for the mind.”
That article set the stage for yesterday’s announcement that minors in China will now be limited to just three hours per week of gaming time.
The new rule allows online gaming platforms to only offer services to minors for one hour per day – from 8:00 p.m. to 9:00 p.m. – on Fridays, weekends, and public holidays. Video game companies must also put real-name verification systems in place in order to enforce the mandate.
Following the announcement of the new restrictions, Chinese gaming stocks stumbled, with NetEase, Inc. (NTES) losing 8.8% and Tencent Holdings Limited (TCEHY) falling 1.4% on Monday’s open.
While the new regulations are a clear indication that the Chinese government wants to curb the video game industry’s hold on minors – and are certainly a cause for concern for investors – a little context is needed to understand the situation…
And the potential profit opportunity it presents.
How do I get some?
The headlines surrounding China’s latest effort to reel in one of its biggest industries – while also strengthening control over its society – are enough to spook any investor.
China is one of the world’s biggest video game markets, with an estimated revenue of $45.6 billion in 2021.
And while taking kids mostly out of the equation seems like it would be a death blow to the industry. But what you need to understand is that minors already make up very little of Chinese video game companies’ revenue.
In fact, Tencent has claimed that revenue from minors only accounts for less than 3% of its gross video game receipts in China.
That’s because ever since 2019, China had already restricted minors to 1.5 hours of gaming per day.
As such, the market’s reaction to the latest regulations is seemingly overblown.
Investing in Chinese stocks is still fraught with danger, as we don’t know where the government will turn its regulatory gaze next. But if you’re looking to put some speculative money to work right now while Chinese stocks are beaten down, Tencent Holdings Limited (TCEHY) is one of my favorite plays.
Gaming in the U.S. is about to see a major shift
Right now, legendary deal makers, A-list celebrities, and an all-star management team are all lining up behind one incredible development.
They’re projecting that this one tiny company has the potential to grow to a $1 billion valuation in the next five years – a 2,500% gain over its current value.
Streaming video has revolutionized the media, industry, and this company’s product is being called “The Netflix of game night.”
Agreements have been signed or are pending with some of the biggest franchises on the planet, including Disney Pixar, Marvel, and Lucasfilm (Star Wars). The world’s biggest game shows like Jeopardy!, Scene It?, Wheel of Fortune, The Price Is Right are jumping aboard too.
It could be the next big thing in entertainment, and this is your opportunity to get in on the ground floor of this incredible opportunity before the rest of the market has a chance.
In the Spotlight: PayPal could be opening a new front
After becoming one of the largest peer-to-peer payment services in the world, PayPal Holdings, Inc. (PYPL) may be setting its sites on a big new frontier.
The online payments platform is reportedly exploring the possibility of allowing its users to trade stocks using its application.
According to CNBC, PayPal has already hired TradeKing co-founder Richard Hagen to spearhead the effort.
The move would mark the latest effort by PayPal to move deeper into the retail trading business – after making moves to allow users to trade cryptocurrency over the last year.
PayPal is also potentially looking to partner with financial institutions to make its trading platform dreams a reality.
While it would certainly take some time to develop, entering the brokerage space would open up a huge new source of revenue for PayPal at a time when retail investing has never been more popular. Keep an eye one PayPal.