[MarketING] Chinese Game Licenses Released, Gaming Stocks Soar

KOSPI and KOSDAQ Start Strong Side by Side
Game Stocks Rally on China License Issuance

[Image source=Yonhap News]

The KOSPI opened higher. Game stocks are showing notable strength following news of China's issuance of game licenses (permission for game services within China). The momentum from China is expected to have a positive impact on game industry stock prices throughout this year.

KOSPI and KOSDAQ Both Open Higher

As of 10:20 AM on the 21st, the KOSPI was at 2,390.57, up 11.37 points (0.48%) from the previous day. The KOSDAQ rose 2.08 points (0.26%) to 804.28.

This strength is interpreted as a result of easing financial instability, such as UBS's acquisition of Credit Suisse (CS), which led to gains in the U.S. stock market. On the 20th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed up 1.20%, the S&P 500 rose 0.89%, and the Nasdaq increased 0.39%.

Han Ji-young, a researcher at Kiwoom Securities, said, "Although the domestic stock market will remain cautious ahead of the U.S. Federal Open Market Committee (FOMC) meeting in March, it is expected to show an upward trend supported by positive external factors such as the resolution of the CS crisis and easing concerns about U.S. small and medium-sized banks. In particular, the fact that the Chinese National Press and Publication Administration issued 27 foreign game licenses, including for Korean games, after three months will positively influence investment sentiment toward domestic game stocks."

Game stocks are showing remarkable strength early in the trading session. Devsisters surged 22.32%, Nexon Games jumped 14.17%, while JoyCity rose 7.11%, Netmarble 6.64%, NCSoft 2.12%, and Pearl Abyss 1.87%. On the previous day, the Chinese National Press and Publication Administration issued 27 foreign game licenses, including for domestic games. Foreign game licenses grant permission to service overseas games within China, and Chinese authorities resumed issuing licenses after a three-month hiatus since December last year. Korean games that received foreign licenses this time include Netmarble's "The Seven Deadly Sins: Grand Cross," Nexon Games' "Blue Archive," "MapleStory H5," Devsisters' "Cookie Run: Kingdom," and T3 Entertainment's "Audition IP Game."

Yoon Ye-ji, a researcher at Hana Securities, said, "China is a market with a strong preference for subculture games (centered on Japanese manga and animation characters) and cartoon graphic works. This license issuance, which includes major Korean subculture titles, is expected to have a greater ripple effect on the Korean game market than last year. The biggest beneficiary of this license issuance is expected to be Nexon Games, as 'Blue Archive' is a major title that ranked number one in sales even in Japan, the birthplace of subculture."

With the growth rate of the domestic game market slowing, global market expansion has become an important task, and entry into China, the world's largest mobile game market, is expected to have a positive impact on game stocks overall. Ahn Jae-min, a researcher at NH Investment & Securities, said, "There are two major periods when positive events are reflected in game industry stock prices: the timing of license issuance and the timing of game releases. As the issuance of licenses for Korean games is resuming, it can act as a monthly event, and from the second half of the year, it can lead to actual releases of games that have already received licenses. Therefore, the renewed momentum from China is expected to positively influence game industry stock prices throughout this year."

Stock Price Declines Are Buying Opportunities for Game Stocks

As game stocks have shown sluggish price trends this year, there are opinions that such price declines should be seen as buying opportunities.

NCSoft's stock price has fallen nearly 16% this year. After rising to the 470,000 KRW range in January, the stock price dropped below 400,000 KRW this month. Krafton fell 1.67% this year, and Netmarble declined 2.8%, showing a sideways trend.

Jung Ho-yoon, a researcher at Korea Investment & Securities, said, "If past game stock investment strategies focused on timing for short-term investment, from now on, it will be more effective to buy at price levels with less valuation burden and invest with a longer-term view on new game release schedules. Since buying at a good price has become important, recent price declines should be considered good opportunities." He added, "Furthermore, until 2025, major game companies will release various new titles across all platforms including mobile, PC, and consoles, so in the long term, earnings and stock prices are likely to trend upward."