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To: Investorman who wrote (1763)	1/24/2001 11:16:27 PM
From: StockDung	Read Replies (1) \| Respond to of 2413

"Hong Kong went as far as to set up a new exchange, the GEM, for its new economy stocks. US$2bn and one year later, regulators are now questioning the GEM's future." The Asian Internet: Battered, Bruised, but Still a Growth Story By TechBuddha (January 22, 2001) Asian investment cycles are notoriously short-lived and volatile. In just one year, Asia's Internet has gone from boom to bust. The movement that began with ambitious young entrepreneurs, well-connected tycoons, and opportunistic venture capitalists is now looking for terra firma as global sentiment takes a dive. As Markets Falter... But that is easier said than done. Asian capital markets are shallow and speculative. Hong Kong went as far as to set up a new exchange, the GEM, for its new economy stocks. US$2bn and one year later, regulators are now questioning the GEM's future. In Korea, a huge online investing population has made the KOSDAQ a study of greed and fear. With these singular aspects of the Asian investment climate in mind, let's review some snapshots from the past year in search of lessons for the future. The Early Birds... The frothiest of all Asian dotcom's, Chinadotcom, kicked off the year 2000 with a secondary share issue of $400mn. It was to be the largest dotcom equity issue of the year. Investment bankers Goldman Sachs marketed the company as a category killer for anyone interested in Asia's "new economy." Indeed, Chinadotcom's scattergun investing style gave it nominal exposure to just about every new investment trend that floated over from Silicon Valley. Like the red chips before it, Chinadotcom was the ultimate concept play...until the tide turned. And Their Minions... And how often it turned. Asia in 2000 was a study in sector rotation and sentiment driven investing and venture capital was as much to blame as the public market. Antony Yip's Myrice.com is but one example of private equity gone awry. Formed in January 2000 from a collection of ill-fated Chinese vertical content sites, youth-oriented Myrice burned through $10mn in funding from venture capitalists and angels before selling out to Lycos Asia for US$12mn. Face Consolidation... Lycos' Myrice purchase occurred shortly after Yahoo!'s US$146mn absorption of Taiwanese portal Kimo and just prior to eBay's US$120mn investment in Korea's Auction. These deals speak volumes about the future of online media and commerce in Asia. Firstly, the capital markets are in no condition to support standalone dotcom IPO's, even those from promising markets like Taiwan. Secondly, China trails developed Asia's online economies by furlongs. This fact is now being reflected in the valuations of China's beleaguered portals. Finally, cooperation with foreign competitors may be the only way to survive the future consolidation of the industry. As We Discover That Services... Consolidation is not necessarily negative. It will reward those companies that have created valuable franchises and will punish those that have used their precious capital for counterproductive purposes. And how to distinguish the two, pray tell? We believe that value lies not in "branding" but in the positioning of useful services and products. During the past year, companies as varied as Singapore's Pacific Internet, Hong Kong's Tom.com, and China's Sohu engaged in branding exercises that had no direct relevance to their business activities. An e-commerce portal attached to an ISP? Freebie promotions and bus advertisements for a holding company? Rock concerts to promote a horizontal portal in China? The lesson for 2001 is that companies should advertise to their users, not their shareholders. And Content... Content is not just filler material intended to draw a casual audience back to your site on a daily basis. It is that news, entertainment, and reference material, that makes going online worthwhile in the first place. Without content, Internet usage would fall and many of the key drivers of e-commerce and access provision revenues would disappear. Asia is very content poor and will be more so by the end of 2001. Content providers are few and financially insecure. Market entrants such as Yahoo! and Lycos realize this and have begun creating incentives for content providers, giving their content partners free advertising and other perks. This would be unheard of in the US, where content providers pay to be included on Yahoo!'s sites. We foresee more cooperation between online content providers and their distributors (horizontal portals and ISP's) in the coming year. Will Decide Who Controls Asia's Online Future Capital is expensive and morale is low, but the future is still bright for electronic media and commerce in Asia. The past year has simply taught us that the future is a little bit further away than we initially predicted. What we really want to know is...where's the return on investment? Top-down estimates will lose credibility in 2001. Whether or not the Asian B2B market will be worth US$300bn in 2004, we want to know about the bottom line: when and how much? Fundamental analysis of companies is back in style. And fundamental analysis is all about management. Unfortunately, management has been the weak link in the Internet story all along. Asian dotcoms are generally staffed by inexperienced entrepreneurs or experienced opportunists. If there is a compelling argument for the consolidation of the Asian Internet by foreign parties, managerial expertise is it. Asia's future, as always, lies in its tremendous growth opportunities. Now is indeed the perfect time to make a well-considered investment in the region's online economy. Valuations have returned to earth and the long term players are differentiating themselves from mere traders. Our advice? Do your homework on the financials and management, find an acquisition target, and damn the torpedoes! Courtesy: Erlangshen english.sina.com