Benefiting from Tencent's business performance in the second quarter, some gaming stocks rebounded in the Hong Kong stock market today, with Netease performing the best. As of press time, Netease-S (09999.HK), CMGE (00302.HK), and iDreamSky (01119.HK) rose by 4.19%, 2.70%, and 1.81%, respectively.

Note: The performance of gaming stocks

In terms of news, Tencent Holdings announced its Q2 2024 performance yesterday. Among them, the revenue of its online games business was 48.5 billion yuan, a year-on-year increase of 9%, and a slight increase of 0.8% month-on-month.

Specifically, Q2 Tencent's gaming business achieved year-on-year revenue growth in both domestic and international markets, with particularly impressive performance in the domestic market. Thanks to the recovery of regular revenue streams from popular games such as "Honour of Kings" and "Peace Elite", as well as new second-tier games such as "Fearless Contract" and "Gold Shovel and the Battle", the growth rate of revenue in the domestic market reached a new high in recent years. The international market also continued its growth trend in recent quarters.

In terms of market segmentation, the game revenue in the international market in Q2 achieved a year-on-year growth of 9% to CNY 13.9 billion, mainly driven by Supercell's games and the growth of "PUBG MOBILE." In particular, the growth momentum of Supercell's "Brawl Stars" has continued to accelerate, and Tencent stated in the financial report that the average daily active users of the game in Q2 reached a historical record high, with revenue growing tenfold year-on-year.

Institutional insiders predict that Tencent Games' international market flow will increase by 40% to 50% year-on-year in Q2 this year. Coupled with the recovery of many popular games in the domestic market, Tencent Games' revenue growth rate in the second half of the year is expected to reach 13%.

Although Tencent's gaming business has shown signs of improvement, its total revenue still fell short of expectations, and the company's stock price did not rise on Thursday. As of press time, it fell by 0.75% to HKD 371.

Note: The trend of Tencent Holdings

Netease rose by more than 4%, leading the gaming sector

The good performance of Tencent's gaming business also benefited other peers, and Netease's stock price rose in early trading, up nearly 5% at one point.

Note: The trend of Netease

In terms of news, according to the data released by Sensor Tower, the download volume of Netease's mobile game "Endless Hegemony" on the Apple iOS system in the Chinese market reached 4.14 million in the first two weeks, which is comparable to the performance of Tencent's "Dungeon and Warriors" mobile game at the initial release.

Morgan Stanley's research report pointed out that the first year's revenue forecast for Netease's mobile game "Endless Hegemony" remains at 6 billion yuan, and it is expected that Netease's game business revenue in the third quarter of this year will reach 22 billion yuan, a year-on-year and quarter-on-quarter increase of 8% and 13%, respectively. The forecast for the growth rate of net gaming revenue in the next two years was raised to 11% (relative to the market expectation of high single digits), reaffirming Netease as the first choice in China's online gaming industry.

Guolian Securities also pointed out that since May of this year, China's domestic gaming market has entered a product cycle, and the number and volume of new head games are higher than the same period in 2023. With the release of supply-side factors in the middle of the year and the high-speed growth of small game channels, the prosperity of the gaming industry in the second half of the year is expected to continue to rise.