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Investors In Chinese Stocks Eye Tibet

March 31, 2008

March 28, 2008: 08:05 PM EST

Mar. 31, 2008 (Investor's Business Daily delivered by Newstex) --

An uprising in Tibet. Blackouts of YouTube and video-sharing Web sites
in China. And the Chinese government blocking all coverage of clashes
between its police and Tibetan protestors.

All this just five months before China's big showcase, the Beijing Olympics.

Analysts say the ruckus won't help Chinese Web stocks, especially online
travel companies such as the U.S.-traded companies Ctrip International
CTRP and eLong (NASDAQ:LONG) LONG.

"(The crisis in Tibet) could get ugly," warns former Reagan
administration trade adviser Clyde Prestowitz. "There's serious
discussion about some countries not participating in the opening
ceremonies for the Olympics. It also poses questions for global
companies sponsoring the games."

Some China stocks already have been lagging for several months over
U.S., global and Chinese economic woes. The trouble in Tibet could make
things worse, though there has not been any big sell-off.

Inflation An Issue

Ctrip's share price is down 12% from an all time-high of 63.24 on Dec.
4. China's search leader, Baidu BIDU, has shed 42% of its value since
briefly hitting a peak of 429.19 on Nov. 6. ELong has lost one-third of
its value since peaking Oct. 11.

But despite some worries, many analysts say the riots in Tibet will have
little immediate impact on travel or other Web firms in China. They're
more worried about Chinese economic issues, like inflation.

"There could be an impact if there's real political instability in
China, but that's not the (situation) with Tibet right now," said Piper
Jaffray (NYSE:PJC) analyst Aaron Kessler.

"Tibet is more likely to highlight the authoritarian nature of China's
government rather than have any immediate bearing on economic matters,"
said Dinosaur Securities analyst David Garrity.

"Chances are fairly good that (China) will get through this Tibet thing
and business will not let up," said James Lilley, a former U.S.
ambassador to China under President George H.W. Bush.

In Ctrip's case, Kessler says the bulk of the No. 1 Chinese travel
site's revenue comes from domestic travelers -- not foreigners visiting
China. Analysts also say as many as 90% of those attending the Games
will be local Chinese and not foreign tourists.

Analysts also point 15ut that unrest in Tibet is confined to a remote
corner of the country and is unlikely to spread to other parts of China.
Reports say the majority of Han Chinese, the ethnic group from which 90%
of all Chinese claim descent, are hostile to the Tibetan protests.

ELong, an online travel firm that offers hotel and air reservations
inside China, also is unlikely to see much fallout from the Tibet flap.
The Beijing-based firm partners with Barry Diller's online travel
company Expedia (NASDAQ:EXPE) EXPE. It's expected to see the same local
boost from the Olympics as Ctrip, though it has missed analyst earnings
targets the past five quarters and trails Ctrip in China's online travel
market.

Foreign investors have been jittery about political incidents in China
since 1989's Tiananmen Square massacre, when Chinese troops crushed
student protestors in Beijing. That crackdown drew international
sanctions and temporarily halted foreign investment in China. The public
relations debacle also dashed China's hopes of hosting the 2000 Olympic
games.

20 Years Later

Prestowitz says fallout from Tibet still has potential to have a bigger
impact on China's economy today.

"Tiananmen Square was much simpler in a way," Prestowitz said. "In 1989,
there was very little foreign investment in China. Wal-Mart (NYSE:WMT)
wasn't there -- the Chinese didn't have much of an economy. Things have
changed in 20 years."

Analyst Kessler says weather recently has had a larger impact on China's
economy than Tibet.

He says Ctrip's revenue from online travel reservations took a dive in
February when unusually severe snow storms paralyzed travel in large
parts of China just as the Lunar New Year, the nation's biggest holiday,
was getting under way. The government says the storms cost China's
tourism sector nearly $1 billion.

Kessler says Ctrip's revenue rebounded strongly in the weeks following
the storms as more Chinese made reservations at its site.

In a note to clients last month, Kessler reiterated his buy rating on
Ctrip and his 68 price target for the year. He notes Ctrip is
"well-positioned" to grab more profit from China's growing corporate
travel market due to its well-run call centers, low prices and access to
hotel reservations inside China.

Dinosaur's Garrity says investors in Chinese stocks have a lot more to
worry about than Tibet. He says a steep price drop for Baidu and other
Chinese companies since late last year reflects worries about government
monetary policy and inflation.
CTC National Office 1425 René-Lévesque Blvd West, 3rd Floor, Montréal, Québec, Canada, H3G 1T7
T: (514) 487-0665   ctcoffice@tibet.ca
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