Trading of People's Daily Online suspended after stock price soars

Shares of People's Daily Online Co, the online portal of the official newspaper People's Daily, closed up 9.99 percent at 38.19 yuan ($6.06) in Shanghai yesterday, and its trading had to be halted since yesterday morning.

The State-run news portal made a strong debut Friday when its stock surged 73.6 percent and its trading had to be suspended twice. The stock soared 91 percent from its initial public offering price of 20 yuan ($3.2) within two days of trading.

The rules on temporary suspension of share trading on the Shanghai Stock Exchange are aimed at reining in speculative manipulation of share prices.

"The reason why investors are bullish about the news portal is because of its unique background," Li Weidong, research director at consultancy China Venture, told the Global Times yesterday.

"In some investors' eyes, the State-backed media company's profits are somehow guaranteed given the support it receives from the government's preferential policies," said Li, noting that he himself has some doubts over the market competitiveness of the website in the long run.

By the end of 2011, People's Daily Online had 18,898 visitors per one million people, compared with Sina's traffic volume of 211,647 visitors per one million people, according to the company's prospectus.

Zhang Qi, an industry analyst at Haitong Securities, also believes that the strong performance of the stock was mainly triggered by speculation.

"Even though the media company has some business development space, its share price now is too high, and it is uncertain if the portal can achieve good business growth in future," said Zhang, warning that there will be a price to pay for speculation sooner or later.

However, Chen Shaofeng, vice president of the Institute for Cultural Industries at Peking University, holds a different view.

"As a professional media company, people.com.cn has stable readership, including local governments and agencies and people who care about social problems, and it also benefits from the government's supportive policies for the cultural sector," said Chen.

Web services of China Central Television and Xinhua News Agency are also reported gearing up to float in Shanghai this year.