Bitcoin Value Steadies After Chinese Government Warning Drop And Internet Sector Surges After China Securities Regulatory Commission Sugguesting Risks
December 9, 2013 |  Print |  Comments | Category: Internet, Law & Policy, Security

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Five Chinese government units, including the People's Bank of China, Ministry of Industry and Information Technology, China Banking Regulatory Commission, China Securities Regulatory Commission, and China Insurance Regulatory Commission, have jointly issued a notice about preventing risks against Bitcoin speculation.

Though the warnings were not full condemnations of the cyptocurrency, sell prices on exchanges as geographically diverse as China-based BTC China and U.S.-based Coinbase.com dropped by as much as 40% over the last few days, respectively. But in the past twelve hours, gthe value on these types of exchanges has appeared to level off at around a value of USD750 per bitcoin.

The government notice pointed out that Bitcoin is not a currency in a real sense and it does not have the equal legal position as a currency. Therefore, it shall not use and circulate as currency in the Chinese market.

The notice also said that financial organizations and payment organizations shall not set prices to their products and services with Bitcoin; they shall not buy, sell or trade Bitcoin as a central counterparty; they shall not implemented insurance businesses related to Bitcoin or include Bitcoin into the insurance coverage; and they shall not directly or indirectly provide other Bitcoin-related services to customers.

The five government units said this risk warning notice aims to protect the property rights of the public, safeguard the legal tender status of Renminbi, prevent money laundering risks, and maintain financial stability.

The notice clarified the nature of Bitcoin, which is a specific virtual product and it does not have the same legal position as currency. However, since the trading of Bitcoin is an Internet trading activity, ordinary people can continue to participate in it under the premise of this type of risk awareness.

Internet Sector Surges After China Securities Regulatory Commission Sugguesting Risks
China Internet Sector Reality check: Bubble burst or a healthy correction?
2014-04-11 00:00:00

Sector share price corrected on average 20% since 7 March 2014. We saw that higher P/E stocks and newly listed names registered larger decline, while low P/E stocks saw relatively less correction. At the current level, share price is flat YTD.
Growth rate vs valuation still very reasonable. We see sector P/E ratio is attractive, given the growth prospects. Median sector 2014/15E P/E is 22.5x/19.7x, this compares to 2015/16E EPS median growth of 30.5%/23.7%. We attribute the recent downward earnings revision for 2014 earnings to investment in mobile Internet-key for longer-term sustainable growth. We see this proactive investment a positive development for the sector. Long-term growth prospects of the sector include: (mobile) users growth, new business models and new verticals penetration.
When will "New Economy" stock be back in favour? Per our APAC equity strategist Sakthi Siva's analysis (detailed report), Baidu and Tencent have consistently traded at premiums over the regional average (on P/B vs ROE basis) since 2004. Over the past 10 years, this premium swings in a wide band. For China Internet stocks, we expect sentiment turns more positive gradually with strong e-commerce sector growth, increasing mobile revenue penetration, and more clarity in new business expansion.
Buying opportunity. We see the current share price weakness as a short-term correction, rather than the "burst of bubble" (or unsustainably high sector valuation). We highlight buying opportunities in good quality Internet names like Baidu, Tencent, Soufun Qihoo, YY and Vipshop.