Wednesday, August 24, 2005
China Finance Online (CHFI) 10-K
The business is substantially dependent on the level of trading activity in China's securities markets. Right now [Aug 2005] the market is at an 8 year low. Volume was only 28% of the previous year.
CFO Pro product targets institutional customers. Probabilistically, these guys are not likely to be the winners in the emerging online market for financial products. They're stuck in the "free information" glut which I don't expect to be easy to overcome. They buy real-time quotes and stuff from the Shanghai and Shenzhen stock markets and offer it to customers. Shanghai stock market contract expires May 2008. Shenzhen March 2006. They get preferential tax treatment from PRC which could end at any time.
After considering what I heard on the conference call, I have to believe that as the financial markets get better established in China, there will be winners and losers. I have no idea whether this company will be a winner, and it doesn't seem like it.