Regulatory limbo hits Tencent with first profit fall in almost 13 years

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HONG KONG, Aug 16 (Reuters) - Shares in China's Tencent Holdings lost more ground on Thursday after it logged its first quarterly profit decline in almost 13 years and said it did not know when it would get Chinese approval to make money off its most popular game.

Tencent's profit decline and caution over the gaming business further hit tech shares in Asia on Thursday. The iShares China Large-Cap ETF shed 3.8% to a 13-month low, as 49 of the 50 components lost ground.

Net income fell 2 per cent to 17.9 billion yuan ($3.6 billion) in the three months ended June, the Shenzhen-based company said, well short of the 19.3 billion-yuan average of analysts' estimates. Social and other advertising revenues rose 55 percent to CNY9.4 billion, driven by growth in its messaging and third-party payment WeChat app, social media WeChat moments app, mini apps, mobile advertising alliance and Apple iWatch rival QQ Watch.

The shift of users to playing these non-monetized games also contributed to a drop in monetization per user, but Tencent adds that the number of daily active users did actually increase year-on-year "at a double-digit rate".

Video games in China have also been criticized for communicating non-socialist ideals (conflicting with the president's repeated mantra of "socialism with Chinese characteristics"), so the future of video games in China remains uncertain. The drop came partly because Tencent. Chinese authorities have been said to be undergoing bureaucratic changes, and the already-shaky status of games consumers in the country is now becoming more precarious. That represented the slowest quarterly revenue growth since the second quarter of 2015. China surpassed the USA to become the world's largest game market in 2016 and many American, Japanese and Korean game publishers rely on Tencent to distribute their games in the country.

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"League numbers are down from their peak, but it's still one of the most-played games in the world and we're very happy with the numbers, and we think some of the new content we're putting out soon can only help with player numbers", Riot said in a statement to Dot Esports.

- On August 13, "Monster Hunter: World", a game developed by Japan's Capcom and licensed to Tencent, disappeared from the latter's Chinese-language gaming site, WeGame, just days after its launch.

The pace of the company's investment is also slowing. It said that the decrease was "mainly due to non-monetization of popular tactical tournament games and timing of new game releases".

The smartphone games business, which includes smash hits PUBG and Fortnite posted 19 percent year-on-year growth to hit sales of $2.5 billion, but that was done 19 percent on that previous blockbuster quarter.