Tencent selloff on draft results an overreaction, says Jefferies

Jefferies analyst Thomas Chong views the share price correction in Tencent Holdings following China’s draft rules for the gaming sector as an overreaction. The draft rules are not a sector crackdown and the market seems to factor in meaningful impact to domestic games despite Tencent’s established large daily active users games are engaging with low average revenue per user, the analyst tells investors in a research note. Jefferies believes the draft proposals by the National Press and Publications Administration are aimed at fine-tuning the rules after it has taken over the supervision of the gaming industry from Ministry of Culture and Tourism back in 2019. Gaming approvals are ongoing and imported games approvals were released last Friday, the firm says. It keeps a Buy rating on Tencent with an HK$478 price target.