A stay of execution for SINA's (NAS: SINA) popular blogging website is sweet news to shareholders.
SINA's stock soared 18% yesterday, after a government official was quoted as saying that Twitter-like microblogs -- including SINA's industry-leading Weibo -- should be regulated in order to "serve the works of the Party and the nation."
This may seem like a problematic statement, but at least it's not a death sentence. Fearing the chatty nature of Weibo users, and seeing how microblogs have been used to overturn restrictive governments in other countries, the easy way out would have been for China to shut down the Web 2.0 revolution.
But SINA still has a lot of ground to make up. Even after yesterday's buoyant close, shares are trading 37% below their April highs.
We know that China has a heavy hand in cyberspace. A search for "Tiananmen Square" conveniently whitewashes any references to the deadly 1989 protests. The ability for anyone to freely post on Weibo or upload videos to Tudou (NAS: TUDO) is problematic for a government trying to preach a unified message. This could be why Baidu.com (NAS: BIDU) closed down its Weibo-like Baidu Talk site this summer.
Investors don't need to panic, even though it may be a good time to separate China's dot-coms into two separate categories. Web 2.0 darlings including SINA Weibo, video-sharing site Tudou, and social networking website Renren (NYS: RENN) will likely be under a tighter watch in the future.
If investors want to dabble in the booming online economy in China, the safer bets will be sites that either encourage business or simply rebroadcast vetted content. A few possible winners here would be employment recruiting website 51job (NAS: JOBS) , e-commerce specialist Dangdang (NAS: DANG) , or video streaming website Youku.com (NYS: YOKU) , which differs from Tudou by emphasizing licensed content (think more along the lines of Hulu than YouTube).
The coast isn't clear yet for the 2.0 leaders -- and it remains to be seen if they can grow in popularity if and when the tighter clamps kick in -- but at least this doesn't appear to be a dead end.
If you want to see where these Chinese stocks go from here, add them to MyWatchlist to track news as it happens.
AddYouku.comto My Watchlist.
AddTudouto My Watchlist.
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AddRenrento My Watchlist.
Add51jobto My Watchlist.
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At the time thisarticle was published Motley Fool newsletter serviceshave recommended buying shares of 51job, SINA, and Baidu.com. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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