Investor reasoning appears to be that all three of these companies are experiencing the rising tide of online advertising growth in China. The local economy in China keeps holding up, despite the China bears worrying about inflation, social unrest and the local property market. All these problems have been contained to this point by the Chinese government. In the meantime, people keep surfing the Web. And, while that's going on -- and the Internet penetration rate in China keeps rising from only one-third today -- advertisers need to spend money to get people to buy their stuff. Sina has also benefited from the explosion in popularity of its Twitter-like Weibo service.
These big Chinese destination portals have been the chief beneficiaries of this trend. One group, however, hasn't participated in this big Chinese stock rally over the past few months: Chinese online-gaming companies.
As Americans, we know that online games are big over in China. I don't think you really appreciate it, however, until you go over there and visit. Among young people especially, these games become an intricate part of their lives.
I was in China last year, and a friend was telling me a story about how it's a problem now that many youths lack good social manners because they spend too much time playing games and texting. He talked about how young people he knows will text each other during the week and suggest getting together on a Saturday at a Starbucks(SBUX-commentary-Trade Now). When they arrive there, they will all sit and play games on their phones separately -- without talking to each other.
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