* Tencent shares fall more than 5 pct, lead sector slide
* Shares hit after China plans to limit number of online games
* Proposal also seeks to curb time young people spend on games (Recasts with Tencent share reaction, context and background)
HONG KONG/BEIJING, Aug 31 (Reuters) - Plans to limit the number of new online video games in China wiped a further $20 billion off Tencent Holdings' market value on Friday, ratcheting up concerns over regulatory risks facing firms in the world's No. 1 market for mobile games.
China's Ministry of Education said late on Thursday the publishing regulator should also take measures to limit the amount of time young people spend playing games and explore an age-appropriate system for players.
The restrictions are the latest challenge to hit Tencent, China's largest game operator, which earlier this month blamed a freeze on new game approvals for the technology giant's first quarterly profit fall in nearly 13 years.
The disappointing results came a day after investors wiped around $15 billion off its market value on news that Chinese regulators had blocked it from charging for of one of its blockbuster titles, "Monster Hunter: World".
Shares of Tencent, which has a market value of around HK$3.25 trillion ($414.12 billion), plunged as much as 5.3 percent, leading a slide in Chinese video game companies. The benchmark Hang Seng Index fell 1 percent.
Tencent has lost a staggering $164 billion in market value from its peak in January, chiefly on regulatory uncertainty, and now trails arch rival Alibaba Group to be Asia's second biggest listed company by market capitalisation.
Beijing's latest regulatory directive was included in a document published on the website of the education ministry outlining how China would respond to worsening rates of myopia, or near-sightedness, among young people.
It blamed high levels of short-sightedness on a heavy study load, the spread of mobile phones and other electronic devices, and a lack of outdoor activities and exercise.
The document also called on parents to limit the amount of time their children spend using mobile phones and other electronic devices, and recommended children spend over an hour outdoors every day.
Analysts said while the regulatory overhang could put pressure on game-related shares, they expected top developers to be less affected.
"We expect leading developers to show relative resilience by lengthening lifecycle of existing game franchise and expanding overseas presence," Jefferies said in a research note.
It estimated Tencent accounted for 42 percent of China's mobile game market share in 2017.
Tencent's decline tracked a 7 percent fall in shares of China-based Netease and a 6 percent slide in Chinese online game developer ChangYou in the United States.
In Shenzhen, shares of YOUZU Interactive fell 7.8 percent, Ourpalm slid 4 percent, Tangel Publishing eased 2.1 percent and Focus Media was down 1.7 percent. ($1 = 7.8480 Hong Kong dollars) (Reporting by Anne Marie Roantree in HONG KONG and Elias Glenn in BEIJING; Additional reporting by Donny Kwok; Editing by Muralikumar Anantharaman)