Tencent and NetEase experienced a notable rebound in their share prices as Beijing appeared to soften its stance on the controversial gaming restrictions that sent shockwaves through the market last week. This unexpected development comes as a relief to investors who had witnessed a significant decline in the value of these tech giants’ shares.

Tencent saw a commendable 4.9% increase in its share price, with smaller rival NetEase surging over 14% during their first Hong Kong trading session following the government’s attempt to alleviate market concerns. Meanwhile, on the Johannesburg Stock Exchange (JSE), Tencent stakeholders Naspers and Prosus gained almost 10% on Wednesday, recovering from the substantial losses they incurred last Friday.

Last week’s $80 billion rout was triggered by regulatory measures that imposed sweeping restrictions on in-game spending and playing time, raising fears of a broader crackdown on the online content sector. Investors, still on edge, saw Tencent’s shares down approximately 8% from levels before the regulations were introduced.

In an attempt to ease concerns, the government has adjusted its approach over the weekend. State-backed media carried comments from industry groups portraying the guidelines in a positive light, while the regulator approved a record 105 games for domestic publication and pledged to review some of the more controversial mandates.

Several gaming companies have also announced share buyback plans, signaling confidence in the industry’s healthy development. Analysts at Citigroup, including Alicia Yap, noted in a Tuesday report, “The normalized approval schedule despite the release of updated guidelines suggests the government remains supportive of the healthy development of the online games industry.”

Despite these positive signals, investors remain cautious, hoping for a rollback of at least some of the more divisive rules after the government gathers industry feedback over the next month.

The recent regulations were explained in state media reports over the weekend, emphasizing that they aim to fill a longstanding gap in China’s complex game censorship regime. The rules, proposed by the National Press and Publication Administration, inherit some restrictions from their predecessor but introduced an unspecified cap on adult player spending, a clause that regulators have indicated they may reconsider.

The gaming industry’s nerves are still rattled by memories of the 2021 tech-sector crackdown, where various agencies imposed abrupt restrictions on sectors ranging from e-commerce to entertainment. This resulted in significant repercussions for companies like Ant Group and Alibaba, reminiscent of the concerns that resurfaced with last week’s gaming restrictions.

JPMorgan Chase & Co. analysts, including Alex Yao, acknowledged the short-term sell-off but expressed optimism, stating, “We expect a negative but insignificant impact on Tencent and NetEase’s gaming monetization.” As the market continues to monitor developments, investors remain hopeful for a more stable and supportive regulatory environment for the gaming industry in China.