Chinese Tech Stock Weekly Summary

The following is excerpted from IRG's weekly stock report:

Internet

• Tencent (TCEHF.PK) announced that it has set up Tencent Research Institute, a core technology platform for the company. The company disclosed that the center, the setting up of which has involved more than 100 million yuan (US$13.3 million) in investment, will be focused on developing practical Internet technology for the coming years. Tencent has also set up research institutes in Beijing, Shanghai and Shenzhen, all of which will focus on studying six major areas of storage technology, data mining, multimedia, Chinese language processing, distributed networks and wireless services.

• According to market sources, Industrial and Commercial Bank of China has made the latest investment in business-to-business Internet services provider Alibaba. Media sources also indicate that Alibaba is going to initiate a road show to raise US$1 billion. Sources said Alibaba has introduced five basic investors this time, which are expected to invest some US$145 million to purchase Alibaba’s shares. Part of the condition states that the five investors must not sell Alibaba’s shares within two years.

Media, Entertainment and Gaming

• CDC Games, a business unit of CDC Corporation (CHINA), announced that its parent company, CDC Corporation, has filed a lawsuit in the South Korean courts against Mgame, the developer of Yulgang. The lawsuit is for breach of contract and alleges that Mgame has broken contractual obligations that the company owed to CDC Corporation by failing to provide certain financial and operating data and other information which Mgame is required to provide to CDC Corporation as a shareholder of Mgame. In March 2007, CDC signed a definitive agreement to make a strategic investment in Mgame. As a result of this investment, CDC became Mgame's largest external shareholder while extending its license of Yulgang to 2010. The lawsuit in South Korea is in addition to the lawsuit CDC Games has filed in the courts of Hong Kong against Mgame for breach of contract, stating that Mgame has not been providing adequate technical support of Yulgang, and Mgame has not been supporting CDC Games in their efforts to combat pirate servers.

• Shanda Interactive Entertainment Ltd. (SNDA) announced that the holders of its US$275 million of convertible notes have exercised their right to require the online video game company to repurchase some of the notes. With this move, Shanda said it will reacquire some an estimated US$15 million of the zero coupon senior convertible notes due 2014. Shanda said it also exercised its right to redeem all of the remaining outstanding convertible notes, which have been valued at about US$260 million of notes.

• According to market sources, Giant Interactive Group Inc (GA) is getting ready to initiate marketing a U.S. IPO worth up to US$800 million. The deal is described by industry observers as the largest capital raising in China’s online game industry. The Shanghai-based company is reportedly selling a 20 percent stake valued at from about US$700 million to US$800 million. The company looks to trading its shares on the New York Stock Exchange, with Merrill Lynch and UBS handling the listing.

• Media sources indicate that Sohu.com (SOHU) is looking to working with China's periodical association to develop digital periodicals. Sources said that Sohu has expressed its interest in becoming the platform for digital periodicals testing.

Mobile/Wireless

• The China Academy of Telecommunication Research of the Ministry of Information Industry announced that it has formally set up a mobile phone testing center in Shenzhen. The academy described the new center as providing fast and high quality mobile phone testing, certification and related services to mobile phone enterprises. According to the director of the Science and Technology Division of MII, the establishment of the testing center is a new move that MII has taken to support the development of the information industry in Shenzhen and the Pearl River Delta region which attributed about 40 percent of the country’s mobile production.

• China Unicom (CHU) officially announced that it will enter the bidding of the fifth 3G license in Hong Kong. According to the Office of the Telecommunications Authority [OFTA], it is currently reviewing the qualification of each bidder and it is expected to auction the 3G license at a base price of HK$76 million (US$9.8 million) by the end of this month. It is said that the owner of the license will be entitled to spend one year laying down networks in Hong Kong and launch CDMA 2000 based 3G service in the area before November 20, 2008.

Telecommunications

• ZTE disclosed that it has passed a resolution at its third shareholder meeting of the year to issue convertible bonds valued at no more than 4 billion yuan (US$532.7 million) in a bid to raise funds for the construction and development of TD-SCDMA related equipment. ZTE said that the 11 projects will require about 10.7 billion yuan (US$1.4 billion).

Ventures/Investments

• The Haier Group said it has decided to move the marketing, planning and sales departments of Haier Computer to Beijing in a bid to speed up the company's expansion. The planned relocation is seen as happening with the beginning of the expansion of Haicheng, the company’s joint venture company. Haicheng is expected to set up a new production base in Jiangsu to engage in exporting services. At present, Haier has some 800 boutique retail stores for its computers and looks to upping the number of stores to 4000 by the end of 2007.

Information Technology

• Shanghai Telecom launched a new payment service called Telephone POS Machine at each of its business halls across Shanghai. The service enables users to make inquiries about the bank account balance of their China UnionPay debit cards and supports account transferring among more than 10 banks' cards. The service only allows users of China Merchants Bank, Pudong Development Bank, Shenzhen Development Bank, and Ping'an Bank to also repay bank loans. In addition, with thistelephone POS, users can use China UnionPay cards to pay their water, gas, and telephone fees. Shanghai Telecom plans to launch air ticket and hotel reservation services soon.

Disclaimer: IRG is not responsible for the accuracy of the news compiled within this article, which is based on publicly available information.