Nintendo shares surge as China eases gaming console ban

January 8, 2014
People ride an escalator past Nintendo Co advertisements at an electronics retail store in Tokyo
People ride an escalator past Nintendo Co advertisements at an electronics retail store in Tokyo April 23, 2013. REUTERS/Toru Hanai

TOKYO (Reuters) - Shares in Nintendo Co Ltd jumped as much as 7.5 percent to a two and a half-year high on Wednesday after China temporarily lifted a 14-year-old ban on selling video game consoles.

The move could pave the way for Nintendo, Sony Corp and Microsoft Corp to enter the world's third-largest video game market in terms of revenue.

"Nintendo hasn't had a catalyst for a long time, so if it can revive (via) the Chinese consumer market then it would be positive," a Tokyo-based trader said.

Still, console makers are likely to face an uphill battle in a country where a whole generation has grown up without a Wii, PlayStation or Xbox. The most popular video games in China are often free to play with gamers only paying for add-ons such as weapons or extra lives.

Price may also be a problem for console makers looking to expand in China. More than 70 percent of Chinese gamers earn less than 4,000 yuan ($660) a month, according to Hong Kong-based brokerage CLSA, not much more than the price of a new Xbox One in the United States.

Another possible hurdle is the availability of illegal consoles, which are modified to run pirated games.

A Nintendo spokesman said on Tuesday the company was still unsure what the opportunities were in China.

Its shares, the seventh most-traded on the main board so far on Wednesday, rose 6.8 percent to 15,280 yen, while the benchmark Nikkei average gained 1 percent.

The Tokyo-based trader said Nintendo was also benefiting from a weaker yen. The Japanese currency was quoted at 104.69 yen to the dollar, not far from a more than five-year high of 105.45 yen set on January 2.

In contrast, shares of Sony, whose business extends beyond game consoles and which is less sensitive to a weaker yen, slipped 0.2 percent to 1,796 yen. Sony's stock outperformed its rival in 2013, rallying 91 percent against Nintendo's 55 percent.

($1 = 6.0512 Chinese yuan)

(Reporting by Dominic Lau; Editing by Michael Perry, Edwina Gibbs and Matt Driskill)