UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: DanishInvestor Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 3430  
Subject: Why the stop in gains? Date: 8/13/2003 1:03 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0

Good to find this discussion board with constructive and informed debate and helpful information.

Thanks to Larry in particular.

I'm also into Chinese tech stocks, portals and other related companies. But why have the recent stratospheric gains fallen flat on the ground. Corrections? Oh yeah! But I recently came across another explanation that was new to me at least.

It seems it is profit taking season for illegal Chinese speculation in the three portals:

Look at this news item:

Retreat of Mainland Funds Pulls Portals' Share Price Down

CHINA, Aug 07, 2003 (SinoCast China IT Watch via COMTEX) -- The share price of China's three major Internet portal companies has dropped for five consecutive sessions on the Nasdaq market because of the outflow of illegal capital.

Sina Corp. closed at US$31.93 yesterday compared with last Tuesday's US$36.72. Sohu.com Inc's share price was down from that day's US$40.80 to US$34.65 yesterday, while Netease.com Inc stood at US$46.75 after its historic record of US$50.76 five sessions ago.

An analyst predicted that the decline will continue for a long time and the price will drop to about US$20, or half of their current level.

"Some illegal funds from China started to retreat after yielding a satisfying return," said Wu Qihua, stock market analyst from Hemoo Investment & Business Consulting Shanghai office. "That will continue to drag down the share price of the three portals."

Chinese people are not allowed to invest in foreign stock markets according to related laws, but Wu said some funds managed to enter the Nasdaq market through illegal channels from China's Zhejiang and Jiangsu provinces. The funds bid up the price of the Chinese-language Websites.

"Sina, Sohu and Netease haven't gained the recognition of international fund managers yet, so their price slid when the Chinese capital left," Wu said.

But Wu declined to elaborate how the illegal Chinese capital flowed into Nasdaq.

A year ago, the three companies were struggling to maintain above the one US dollar delisting line. Sina's share price was around US$1.70 last August while Netease and Sohu were roughly US$1.60 and US$1.20 respectively.

"Afterwards, rapid growth in the short message service business boosted the profits of these companies, which triggered the jump in their share prices," Wu said.

Sina's non-advertising revenue, in which paid short message services account for a major part, jumped five times to US$16.5 million in the second quarter. That represents 64 percent of the company's total revenue.

Non-advertising income of Sohu was US$12.5 million in the second quarter, or 65 percent of total revenue. The figure grew 346 percent year-on-year. That of Netease grew by 280 percent from a year earlier to US$13.9 mil-lion, or 85 percent of total.

What is more, industry officials warned the rapid growth of short message services in China have attracted more service providers. That will inevitably cause the profit margin to decline, and affect the profitability of the three portals in the future, insiders say.





From GD-HK Information Daily, Page 6, Tuesday, August 05, 2003

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

2013 Feste Award Voting Begins!
Who will win the 2013 Feste Award? Vote now for the Fool that most exemplifies the Fool Community mission of Learning Together!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Tax Strategies

TMFPMarti-Feeling Good
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement