08:00 Chinese Internet portals stocks are likely to fall sharply - NYT
The New York Times reports that shares of three Chinese Internet portals (SINA, SOHU, NTES) have been among the highest fliers on the Nasdaq market recently, tripling in value over the last 12 months. But some financial analysts warn that the Chinese stocks are likely to fall sharply, much as American Internet stocks did in 2000. "The bubble is going to burst," said Andy Xie, a Morgan Stanley economist based in Hong Kong. "It's going to be bad." For the moment, though, investors celebrating China's Internet revolution have drowned out warnings like Mr. Xie's. "There is a certain exuberance" about the Chinese Internet stocks, said Robert D. Hormats, vice chairman of Goldman Sachs. "It's like the gold rush in the middle part of the 19th century in California." Based on their price-to-earnings ratios, which are commonly used as a measure of value, the three portal stocks are richly priced. Last week, the ratios of the companies were 60 for SINA, 43 for Sohu.com and 48 for NetEase.com. By contrast, Yahoo's P/E ratio was even higher, at 120 and eBay's was 88. The average ratio in the Standard & Poor's 500-stock index was less than 24. "They are so expensive, and it's hard to tell whether they will be around in 10 or 15 years,'' says Mark Sellers of Morningstar. "For every one of them that's going to be the next Yahoo or eBay, 10 will crash |
