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Why Nintendo Stock Surged More than 14% on April 22

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Apr. 24 2019, Updated 11:24 a.m. ET

Nintendo is finally entering China

Nintendo (NTDOY) recently announced that it’s selling its Switch console in China in partnership with gaming giant Tencent (TCEHY). It’s finally entering the country, where it’s had no footprint until now.

The move will see the Japanese video game maker enter into the biggest gaming market in the world. The tie-up between Tencent and Nintendo was announced after its approval by Guangdong regulators. The two companies will require approval for every game they release in the country.

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The Chinese gaming industry is dominated by PC and mobile games. Consoles were banned in the country until 2014, which allowed Tencent to retain its hold on the market. Even today, consoles make up a negligible amount of the country’s overall gaming market.

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The deal could be lucrative for both companies

The Switch was introduced by Nintendo two years ago and was met with immediate popularity. Nintendo has sold an impressive 32.3 million Switch consoles globally since its release.

The association between the two gaming giants could lead to better opportunities for both. For example, Tencent could potentially make mobile games using Nintendo characters such as Mario.

Tencent’s gaming revenue has been slowing drastically since Chinese authorities started freezing its licenses.

The news of the collaboration caused Nintendo stock to surge more than 14% on April 22. Tencent stock was largely unaffected by the news.

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