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Sina Stock Falls on Anti-Porn Crackdown: China Overnight

April 25 (Bloomberg) -- Sina Corp., owner of China’s biggest Twitter-like service, sank to a one-year low after the state-run news agency said it was looking at revoking two of the company’s licenses amid a crackdown on online pornography.

American depositary receipts of Sina declined 3.1 percent to $51.64 yesterday, extending this week’s plunge to 8.7 percent. The Bloomberg index of the most-traded Chinese stocks in the U.S. rose 0.1 percent to 99.48. YY Inc., a social entertainment website, dropped the most in two weeks while video website Youku Tudou Inc. slid 5.3 percent. Baidu Inc., the owner of China’s largest Internet search engine, surged in after hours trading as earnings beat analysts’ estimates.

Twenty articles and four videos posted on Sina contained lewd and pornographic content, Xinhua News Agency said yesterday, citing a statement from the National Office Against Pornographic and Illegal Publications. The government will revoke licenses on Internet publication as well as audio and video and impose “a large number of fines,” Xinhua reported. Shares of online companies fell earlier in the week after China closed 110 websites as part of the nationwide crackdown.

“There’s a lack of information on exactly what will be impacted and there are a lot of investors that just don’t want to deal with it,” Cheng Cheng, an analyst at Pacific Crest Securities LLC in Portland, Oregon, said in a phone interview. The investigation also signals other social websites “could be potential targets of a crackdown.”

Sina is in discussions with government officials after being notified that its licenses may be revoked, said Wan Rui, a Beijing-based spokeswoman for Sina. The company apologized yesterday for allowing pornographic content and said it will accept “strict” punishment, according to a statement on its official microblog.

3,300 Accounts

China, home to 618 million Internet users, censors the Internet by blocking websites such as Facebook and deleting postings that it deems as a threat to social stability. About 3,300 accounts on China-based social networking services, including Tencent Holdings Ltd.’s WeChat and Sina Weibo, were deleted as part of the anti-porn campaign, Xinhua reported April 20.

The country’s top court said last year Internet users could face jail time for posting comments deemed defamatory that are viewed by more than 5,000 people or retweeted more than 500 times, giving authorities a legal basis to put those who post rumors on trial.

“The fear is that this becomes a bigger issue,” Tim Ghriskey, chief investment officer at New York-based Solaris Asset Management LLC, which helps manage about $1.5 billion in assets, said by phone. The Chinese government “could impose stronger controls over the Internet and really limit public access to a number of different venues.”

Baidu’s Earnings

YY fell the most in the Bloomberg China-US Equity Index, dropping 5.5 percent to $64.80. Youku slumped for a second day to $24.45.

Baidu rallied 7.7 percent to $172.02 at 4:45 p.m. in New York after gaining 0.3 percent to $159.74 in regular trading. First-quarter net income rose 24 percent to 2.54 billion yuan ($406 million) from 2.04 billion yuan a year earlier. That beat the 2.1 billion-yuan average of eight analyst estimates compiled by Bloomberg.

Semiconductor Manufacturing International Corp. jumped 7.3 percent to $4.27. Second-quarter sales at the chip foundry will rise 15 percent from the previous quarter, JPMorgan Chase & Co. analysts led by Gokul Hariharan wrote in a note. China Telecom Corp. gained the most since November, climbing 3.3 percent to $46.18.

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., rose 0.1 percent to $34.98. The Standard & Poor’s 500 Index advanced 0.2 percent as better-than-forecast earnings from Apple Inc. and Facebook Inc. boosted technology shares.

The Hang Seng China Enterprises Index of mainland stocks traded in Hong Kong rose 0.4 percent to 9,940.63. The Shanghai Composite Index decreased 0.5 percent to 2,057.03.

To contact the reporter on this story: Alexandria Baca in New York at abaca3@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net Rita Nazareth

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