Online gaming companies Tencent and NetEase recover after Chinese regulator's promise of new rules.

• China's top gaming regulator will meticulously examine the opinions of all stakeholders regarding proposed rules to control excessive online gaming and spending.
• Despite gains on Wednesday, Tencent, NetEase, and Bilibili shares only retraced a small portion of their steep losses recorded last Friday.
• Hong Kong markets were closed Monday and Tuesday for the Christmas holiday.

Chinese online gaming stocks increased on Wednesday, regaining some ground lost in the previous session following the announcement of the gaming regulator's plan to revise and enhance the proposed rules to control excessive online gaming and spending.

On Saturday, China's National Press and Publication Administration pledged to carefully examine the concerns of stakeholders following the rejection of new rules that affected the Hong Kong-listed shares of Tencent, NetEase, and Bilibili.

The regulator, which oversees the publication of new games in the world's largest online gaming market, announced Monday that it approved over 100 domestic games, following Friday's announcement of approving 40 imported games.

Nomura analysts stated in a Tuesday note that while they believe the fire-quenching measures may alleviate some market concerns, they are insufficient to eliminate the overhang resulting from the draft regulation.

On Wednesday, Hong Kong markets returned from the Christmas holidays, causing shares to surge as much as 14% in early trading. Despite this, NetEase eventually ended the day up only 11.9%. The stock had previously plummeted about 25% on Friday.

On Wednesday, the rival social media site that derived 17.1% of its total third-quarter net revenue from Chinese domestic gaming climbed 6.7%. Its shares had tumbled about 10% on Friday, after shedding more than $43 billion in market value.

Despite Wednesday's rebound in share prices, only a small portion of the significant losses incurred on Friday was recovered before the Hong Kong markets closed for a four-day Christmas long weekend.

Lingering concerns

China's top online gaming regulator announced on Saturday that it would seek feedback from stakeholders to modify and improve the draft rules released on Friday, particularly focusing on Articles 17 and 18.

These two articles emphasize the importance of preventing the practice of incentivizing daily sign-ins for games, as well as other revenue-generating techniques.

The two articles prohibit online games from compelling players to engage in duels with one another and also prohibit game owners from facilitating or supporting high-value or expensive transactions in virtual entities through auctions or speculative activities.

The National Press and Publication Administration proposed banning daily login rewards and imposing recharging limits with pop-up warnings for users exhibiting "irrational consumption behavior," according to a draft set of rules.

The latest draft rules emerged amidst a broader crackdown in the China technology industry that began in late 2020.

— CNBC's Evelyn Cheng contributed to this story.