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Hong Kong Stocks Get Net Fever

Last week, Hong Kong Internet-related stocks gained as investors reacted to substantial developments in the local industry.

Highly visible gainers included Hongkong Telecom (HKT), Wharf Cable, SmarTone, and ABC Communications.

Credit Suisse First Boston analyst Francis Cheung indicated that the increase in value Internet listings is understandable considering the success of Singapore ISP Pacific Internet offering on NASDAQ.

"My feeling is that not everyone is going to succeed in this business," said Cheung.

However, according to Cheung, without the ability to determine who will succeed, the market is going for any companies across the board that are somehow tied to Internet services.

With continued speculation concerning the probable listing of HKT-owned ISP Interactive Multimedia Services (IMS) on the NASDAQ, the primary fixed network provider's stock value increased 5.88 percent last Thursday and 8.47 percent on Friday.

Moreover, according to the South China Morning Post HKT's valuation has grown approximately US$7.5 billion since its deal with Microsoft became public knowledge. For its broadband network, HKT will be using Microsoft's MCIS platform and downloaded software.

"[Hongkong Telecom] just lost their ISR monopoly this year," said Cheung. "What Hongkong Telecom has been able to do is refocus people on IMS."

Antonio Tambunan, Hong Kong manager of Deloitte & Touche Corporate Finance and a player in the local Internet industry, pointed out that HKT's success has more do with the whole picture rather than the front-end Internet side.

"Everyone here is still talking about portals. [HKT] is not just a portal. It's a redistribution and redefining and channeling of their business - their other services," said Tambunan.

"Basically, everything that [market analysts] are talking about is what the US went through eight to 15 months ago," said Tambunan. "We are going through the same questions. This nothing new for those in the industry."

Wharf Cable has capitalized on the launch of its dial-up ISP, iCable, and its plans to introduce a cable modem-driven broadband Internet service some time this year. The cable company's stock has risen over 80 percent since it launched its Internet service (on Friday, it went up 9.82 percent).

Wharf's advantage is its cable TV subscriber base, as Cheung explains, "Any kind of subscriber base gives credence to an ISP."

The cable company could also bundle its cable TV and Internet services and leverage off its TV content.

The stock of Mobile phone company SmarTone did well earlier last week with the announcement that it was launching an ISP and that it had closed a content deal with American Internet juggernaut Yahoo!.

"Leading in providing new services and high speed data services later this year, they need content," said Cheung. "Yahoo! gives them credibility."

The value of ABC, a smaller company with mobile phone and Internet services, surged about 8 percent on Thursday with rumors that Pacific Century Group, the Cyberport developer, was looking for a backdoor listing.

Even more interesting is Pacific Century's venture with Intel and the group's reported interest in developing a Satellite-based Internet service, said Cheung.