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To: badon518 who wrote (4799)	4/9/2000 11:57:00 AM
From: chirodoc	Respond to of 6018

sell off is good for leaders--in the end New Economy Firms Can Focus On Growth Following Sell-Off By HENNY SENDER Staff Reporter of THE WALL STREET JOURNAL HONG KONG -- This week's sharp sell-off in technology stocks may actually mean good news for established players in Asia's New Economy: They'll be able to grow more quickly and profitably as it gets harder for new players to raise funds, some executives say. 1 The selling eased Thursday as investors in parts of Asia, cheered by a modest rise on the U.S. Nasdaq Stock Market the day before, dipped back into some of the hardest-hit shares. Key indexes in Hong Kong and Singapore climbed, but markets remained down in Tokyo, Taipei and Seoul. Late in the session Thursday, the Nasdaq Composite Index added 46.92 points, or 1.13%, to 4216.14. Though the Nasdaq was heading upward, it isn't clear that the downturn is over yet. The money flowing out of technology shares -- especially those deemed most speculative -- has forced Internet companies to contemplate a world in which the equity markets aren't as obliging as in the prior week. That's good news for some. Players who are relatively well entrenched are contemplating a less-crowded market as their rivals, suddenly unable to list, run out of capital -- and steam. Investors Are Cautious "Our war chest is there already," says Leroy Kung, chairman and chief executive officer of iMerchants Ltd., a listed Hong Kong-based provider of e-commerce infrastructure. "We can fully execute our business plan. This allows us to be more aggressive and effective in expanding." With investors more cautious, he adds, potential rivals are being screened out. The changing dynamics will affect business strategies, executives say. As new entrants find it more difficult to raise capital, "established players will be able to concentrate on their margins, not on market share and marketing," says Elizabeth Tran, chief investment director for Asia at American Express Asset Management Ltd. in Hong Kong. "With less competition, stronger companies can put up their margins." On the surface, the timing of the sell-off might seem unfortunate for techpacific.com Ltd., an Internet investment bank and incubator that plans to list on Hong Kong's Growth Enterprise Market in April. For one thing, the company expects retail participation in its initial public offer to be weaker than it would have been a month ago. But even here, executives see a silver lining. "We're definitely beneficiaries of a saner market," says Johnny Chan, techpacific.com's chief executive. "In the heyday, when we wanted to make an investment in a company we often lost the deal to buyers who offered 10% cash and 90% shares. But now ... people will be less willing to take the risk of accepting shares and then selling them in the market." Asia Online Ltd. President Kevin Randolph sees the downdraft as a chance to snap up weaker competitors. "If money is less easy to get, then people will begin to ask what else makes a difference and that ought to help us," says Mr. Randolph, who was outbid in recent months on several hoped-for acquisitions in the region. "We were competing in situations where there wasn't any margin for us, the valuations had moved up so much." The economics of Internet companies may be affected in other ways as well. So far, it isn't only the cost of capital that has been close to zero for the hottest companies. Their operating costs have been lower than costs at traditional companies because the new breed tend to pay their staff with share options as well as cash. But now, weaker companies will have a harder time holding on to employees using share options as an incentive. Gentlemen Prefer Bonds Even before the sell-off gathered intensity this week, New Economy companies were beginning to explore alternatives to the equity market for funding. While banks usually haven't felt comfortable lending to companies with few assets and no cash flow, Asia Online's Mr. Randolph says his company has talked with bankers about using expected future revenue as collateral for loans. With the equity markets weak, other firms are looking into the possibility of raising money through bonds, making them convertible into shares or offering generous yields to attract more-conservative bond investors to such speculative plays. "We get inquiries every day," says Vic Garber, managing director at Morgan Stanley Dean Witter in Hong Kong. "But bondholders are more disciplined. You've got to show them what you'll do with the money -- and how you'll repay it."