China gaming ban brings BetaShares’ ASIA (ASX:ASIA) ETF into focus

The China government is not playing around with concerns of gaming addition in children. Here are the details…

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A gamer slumps his head in his hands in front of two gaming screens

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The BetaShares ASIA Technology Tigers ETF (ASX: ASIA) exchange-traded fund (ETF) is back in focus on Tuesday after a major announcement from the Chinese government last night.

In a dramatic move, China is opting to ban children from playing online games for more than 3 hours per week. Considering the People’s Republic holds the largest population of any country on the planet, as well as one of the highest youth populations, this decision could deal a significant blow to the gaming industry.

Tightening controls around addiction concerns

The hammer has been brought down by the China government to introduce even heavier restrictions on youth gaming overnight. This decision follows reports made earlier in August, dubbing gaming as ‘spiritual opium’ by the Chinese state media.

Under the new rules, people under the age of 18 will only be allowed to play online games under the tighten time constraints. These new gaming periods are reserved between 8:00 pm and 9:00 pm on Fridays, weekends, and public holidays.

As a result, children will typically be reduced to 3 hours of gaming per week. In comparison, the government’s previous allowance was for an hour and a half per day and up to 3 hours on public holidays. In other words, kids will go from 10 and a half hours per week down to 3, as the local government attempts to combat its concerns of gaming addiction. Unfortunately for ASIA ETF investors, some of the impacted companies are featured in the tech-focused investment.

To enforce these restrictions, the government will demand companies utilise real-name verification systems. Gaming companies will not be allowed to provide their services to minors outside of the specified timeframes.

Unsurprisingly, investors of internet and gaming companies with exposure to China have been unsettled by the announcement. At the time of writing, the Tencent Holdings Ltd (HKG: 0700) share price is down 3.3%. Likewise, Chinese PC and mobile games company NetEase Inc (NASDAQ: NTES) is trading 3.5% lower.

ASIA ETF exposure

When it comes to the BetaShares ASIA ETF, 45.5% of the fund’s holdings are exposed to China. At the same time, many of these companies are geared towards the internet, gaming, and/or online media sectors. For instance, 17.8% of the fund is in the ‘interactive media and services’ sector. Meanwhile, 9.5% is allocated to ‘interactive home entertainment’.

This is evident when looking at the ETF’s top 10 holdings. According to the July fact sheet, the ASIA ETF counted Tencent as its fourth-largest holding at 9.2%. Another familiar face is NetEase, sitting at the tenth spot with a 3.4% weighting.

At the time of writing, the BetaShares Asia Technology Tigers ETF holds $665 million of total assets under management.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended NetEase. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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