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China Shares Post Gains

BEIJING -- Shares were higher in China Monday, as the Hong Kong index added 0.9% to 16,603, and its counterpart in Shanghai was up 0.2% to 1734.

That was a stark contrast to the horror movie that played out for China Net stocks in New York Friday, as the market digested a slew of strict new Chinese regulatory policies for wireless names .

Tom Online (TOMO) spiraled down 19.6% to $13.67, Sohu (SOHU) was off 8.7% to $23.62 and Sina (SINA) closed down 7.4% to $22.83.

Linktone (LTON) gave up 4.1% to $5.14, and Hurray! (HRAY) was off 2.4% to $5.20.

Late last week, news broke that leading cell-phone operator China Mobile (CHL) had endorsed a raft of new policies on wireless service providers aiming to reduce customer complaints, at the behest of the Ministry of Information Industry, China's telecom regulator. China Mobile's provincial offices have three weeks to submit their implementation plans, so it's not precisely clear when the revamp will take effect nationwide.

As for the substance of the changes, wireless firms will have to start offering free monthly trial periods and provide wireless service only after new customers have twice confirmed they want it.

Also, provincial operators are expected to begin canceling WAP (wireless application protocol, which allows cell-phone users to access the Internet) subscriptions that have been inactive for more than four months, and wireless firms will have to start billing for message services by the month, rather than per message sent.

Deutsche Bank's William Bao Bean downgraded a batch of names to a hold rating, including Tom, Linktone, KongZhong (KONG) and Hurray, saying he's waiting "for better visibility on the degree and duration of policies."

Though most companies issued releases, they couldn't provide much clarity other than making clear the changes will hurt. On regulatory issues, China is far more decentralized than the U.S., making it hard to guess what will actually play out in China's 31 provinces.

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