China Stocks End Mixed

BEIJING -- Stocks ended mixed in China Friday, with Hong Kong's Hang Seng Index falling 0.1% to 16,464, while in Shanghai the benchmark Composite Index added 0.6% to 1665.

In New York, China tech names were mostly down in Thursday trading. Online job-posting site 51Job ( JOBS) fell 5.9% to $19.90 and travel site eLong ( LONG) lost 4.7% to $13.87.

Airline stocks bucked the trend, with China Southern Airlines ( ZNH) up 0.2% to $11.16 and China Eastern Airlines ( CEA) closing up 0.4% to $13.40.

Friday, China Eastern confirmed long-standing rumors by acknowledging it has had recent discussions with potential investors, including Singapore Air.

The Shanghai Securities News quoted China Eastern President Li Fenghua saying the airline had been in touch with investors and that it aims to sell at least 20% of its shares.

Speculation over the potential sale of a China Eastern stake follows a spate of regional airline deals this spring. In June, Hong Kong carrier Cathay Pacific took control of Hong Kong's Dragon Airlines in a $1 billion deal, while at the same time doubling its stake in mainland carrier Air China to 20%.

That left marketwatchers wondering about the fate of state-run China Eastern and China Southern, both loss makers. Of the two, China Eastern is considered a more inviting acquisition target, given its base in the business hub of Shanghai.

Meanwhile, in the Internet arena, one China analyst offered a preliminary damage assessment on the effect of new wireless regulatory policies for lead industry player Tom Online ( TOMO).

Carrier policies announced earlier in July will require month-long free trial periods for wireless services, among other things. Since an average subscription period for wireless services is only three months, the shift is likely to take a substantial bite out of service-provider revenue.

On July 10, Tom said in a release the policies would weigh on its sales, but it hasn't yet given any specific numbers.

In a note issued Thursday New York time, Hong Kong-based Lehman analyst Lu Sun forecast the change could cut Tom Online's sales (excluding newly acquired Infomax) by 20% in the second half of 2006 and 26% next year.

"We suspect the new regulatory changes will severely hurt the top-line performance and profitability of Tom Online in the near to mid term, given that WVAS wireless value added services accounts for 94% of total revenue, and subscription-based products account for approximately 65% of total WVAS revenue," Sun said, adding she expects the stock to stay "sluggish" in the near term.

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