NEW YORK, NY -- (Marketwire) -- 06/11/12 -- Chinese internet stocks have struggled recently amidst concerns of China's slowing economy. But a recent rate cut by China's central bank, the first in over 4 years, signaled that the Chinese government was willing to take strong measures to help boost its economy. As a result many China-based stocks received a boost early Thursday. Five Star Equities examines the outlook for companies in China's Internet Industry and provides equity research on Renren Inc. (NYSE: RENN) and SINA Corporation (NASDAQ: SINA).
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China's central bank, the People's Bank of China, cut benchmark interest rates by 25 basis points. One-year borrowing rates fell to 6.31 percent and deposit rates dropped to 3.25 percent.
"As the first rate cut since Dec. 2008, the surprise move sends a strong signal that the government will be more active in supporting demand and stabilizing growth," wrote Shuang Ding, Minggao Shen, and Serena Wang, Hong Kong analysts at Citi Investment Research & Analysis, in a recent note. "We see this as a shift of monetary policy tone that would help lower borrowing costs and improve confidence, increasing the chance for the economy to bottom in Q2 and rebound in Q3."
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According to a recent article in the Wall Street Journal China will be proposing a law that will increase the pressure on internet companies to control content. Under the new law users of blogs, microblogs, and internet forums will be required to use real identification, and will be punished by the government for the distribution of any information they deem to be illegal.
"It will be difficult to implement [these changes] and it will take time," said David Wolf, chief executive of Wolf Group Asia. "The government is saying this is a long-term goal; you will be expected to comply as an individual and as a company. If you don't comply, you leave the government the opportunity to punish you in the future."
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