"The key here is, not only PUBG, but no games are able to get licenses now", a person from Tencent told Reuters on Tuesday on condition of anonymity due to the sensitivity of the matter. The iShares China Large-Cap ETF shed 3.8% to a 13-month low, as 49 of the 50 components lost ground.
In the second quarter ending in June, Tencent registered $3.3 billion in profit, a 26% increase from the same period past year.
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In more positive highlights, monthly active users at WeChat rose almost 10% to 1.06B. That compares with the 19.3 billion-yuan average of analysts' estimates compiled by Bloomberg. Games approved before the end of March can be released, but not necessarily in all formats or monetizable versions.
The company's gaming woes increased this week when its WeGame platform was ordered by Chinese regulators Monday to withdraw its newly released title "Monster Hunter: World".
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. Although gaming revenue made up 40 percent of the revenue, it is also the business line that is causing the financial woes.
Tencent surprised investors with its first profit drop in at least a decade - a effect of a freeze on game approvals in China that smothered its pipeline.
The Chinese government has been halting its approvals of new online game licences as Chinese President Xi Jinping pushes a "purification" campaign in media and entertainment, according to reports.
The company said it would seek to boost mobile game revenue growth by "boosting engagement and monetisation of existing games". Its revenue in the period rose 30 percent, to $11.1 billion. For example, Tencent's market value has fallen more than $150 billion since January.
Tencent blamed its profit decline also on fewer investment gains.
Holding up earnings this past quarter has been the company's inability to make money in China off Player Unknown Battleground, commonly called PUBG, a popular game that pits players against one another in a battle to the death on an island covered with weapons, vehicles and sniper nests.