By Perry Wu
Black Tuesday turned bloody for Chinese technology stocks, as the market moved towards a major correction this week and Web and mobile companies saw their value sink.

What started out as downward trend in Shanghai with a loss of US$108 billion in value on Tuesday filtered through the world's markets, causing all major indices to drop like cold dumplings in a hot bowl. It also turned into a journalist's dilemma as unique synonyms for "drop" became hard to find to describe all the falling companies.

PacificNet (PACT.PK), whose CFO's abrupt departure two weeks ago caused the stock to sink 10%, sank another 11.6% yesterday on word of hard times for Chinese companies. Chinese search engine Baidu.com (BIDU) dove 6.2% and Netease.com (NTES), which just a day before posted decent profits for its Q4 2006, shaved almost 8% off its stock price.

One of the biggest losers was Chinese online game and entertainment operator The9 (NCTY), whose stock lost US$5.45, or 14%. Rival online gaming firm Shanda (SNDA) only saw 9% butchered from its nose-bleed price, and it ended the day at a more reasonable, though still ridiculous, US$22.62.

For China's dubious mobile-value added service companies, Linktone (LTON) lost 8%, Kongzhong (KONG) dwindled by 6%, and Hurray (HRAY) investors decreased their MVAS dreams by 5%.

Having worked with many Chinese technology companies over the years, I am a bear when it comes to their stocks, and I refuse to buy into their investor marketing babble. Investors deserved to lose money, because it is investor ignorance that is propping up many of these bubble Chinese technology companies.

Armchair investors outside of China first believed that China's mobile value-added services sector was a hot investment vehicle, and they failed to see the fine-print describing how very little MVAS companies earn from their services via China Mobile (CHL) and China Unicom (CHU). Now we have investors riding the online gaming rage in China, which is also very much a bubble, with many listed companies diverting funds into GAAP-friendly coffers to bloat their gaming revenues. You can take a company out of China, but you can't take China out of a company.

I am still a bull on China's technology sector, but inadequate corporate governance, dubious accounting rituals, and few oversights make me hope that some good will come from these sinking stocks and they can drip drop dwindle decline to their final, suitable resting spots.

About the author:
Perry Wu is a writer and correspondent for ChinaTechNews.com and can be reached here at the site. Perry Wu does not hold any positions, long or short, on any of the Chinese or American company securities mentioned in this article.

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3 Responses to “Chinese Tech Stocks Tumble, Finally”

1. By International Institute of Management – February 28th, 2007 at 11:18 am

   International Institute of Management (IIM) released a new report warning about the U.S. economic health status. The report provides the following:
   1. Uncovers the forces behind today's stock-market decline and the Chinese reaction to U.S. Economic outlook.
   2. A detailed analysis of the economic, social and geopolitical risks facing the U.S.
   3. Forecasting the behavior of the U.S. and global markets.

   The complete text of the report is available here.

2. By tired investor – February 28th, 2007 at 4:37 pm

   I agree 100%. The devil is in the details and American NASDAQ and NYSE investors forget that China is a different country with different rules. Companies still need to follow GAAP if they're listed on American exchanges but how they get their money is the important thing to remember.

   Thank you for providing intelligent insight into these problems and showing that many Chinese Net companies are perhaps highly overvalued.

3. By Ted Roberson – February 28th, 2007 at 5:00 pm

   Perry: you're wrong about everything everything everything and I doubt you are a serious investor because I sure as hell can't take you seriously. What is this about MVAS companies not being worth anything? Linktone just tried to buy a UK mobile company. Is that what you consider a non-valuable company trying to buy a well-known British firm? And the downtrend not only hit Chinese tech companies but also just about every other company under the sun. Don't blame Chinese stocks! You're not worth reading!

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