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
(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.

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