Thursday, November 18, 2010

The World of the Web in China

By Eric Jackson
RealMoney Contributor

11/18/2010 5:30 PM EST
Click here for more stories by Eric Jackson

Has there been a downturn lately in the markets? You wouldn't know it from looking at some of the China Web names.

In the last month, the Nasdaq is basically flat. However, the big China Web names Sina (SINA -commentary - Trade Now) and Sohu (SOHU -commentary - Trade Now) are up 12% and 20% respectively. Just yesterday, on another down day for the markets, Sina was up 6% after it released a positive earnings report the night before. Investors had first sold off the stock in after-hours trading because the company's outlook for future revenues appeared to be lower than what analysts had expected.

However, given some time to study the report, Sina investors saw that the short-term hit to the company was primarily due to stricter government rules and regulations affecting the fourth quarter. Yet, for 2011, the company was continuing to expect strong growth.

The whole portal space in China has been buoyant this year. China has seen media ad spending jump by 18%, thanks to big events like the recently closed Expo in Shanghai and the current Asian Games in Guangzhou. Big portals are having a big second half of 2010. (NTES - commentary - Trade Now) is up 27% in the last six months.

Of all the Chinese Internet stocks, Baidu (BIDU - commentary - Trade Now) is the best known to U.S. investors. It's now trading around $110, giving it a $37 billion market capitalization. Once Google (GOOG -commentary - Trade Now) exited the mainland earlier this year, Baidu stepped on the gas pedal, and it hasn't looked back. The stock is up 153% for the last 12 months and -- would you believe -- it is a 10-bagger from about two years ago, when it closed at a low of $10.91 on Dec. 5, 2008.

As a reference point, Baidu is now valued at twice the level of Yahoo! (YHOO - commentary - Trade Now) and the same as eBay (EBAY - commentary - Trade Now).


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