SAN FRANCISCO (04/10/2000) - Sitting in New York looking back at this week's Nasdaq-sponsored financial S&M spectacle, it's tempting to see the market craziness as a U.S. bubble, if you'll excuse the expression.
But amid the talking heads and the ticker-blurs on CNNfn, CNBC and others, one thing has become clear: Nowadays, when the Nasdaq sneezes, the whole world catches a cold. Of course, it's hardly news that wild fluctuations in the U.S. or any other financial market reverberate around the globe. But as Asia's 1997 economic crisis demonstrated and as Tuesday's Nasdaq ride hammered home, our global economy is more enmeshed than ever.
And as other countries increasingly look to the Internet for economic parity with the U.S., it's the Nasdaq that pulls the strings. "It just so happens that the Nasdaq is high profile and offers a ready access to cash," says Ramzi Zeine, CEO of Arabia Online, a pan-Middle Eastern portal based in Jordan that has designs on the tech index. "The Nasdaq is where you want to be."
During the past year, an increasing number of foreign-based and foreign-targeted Internet companies have chosen to forgo international trading markets in favor of listing themselves on the Nasdaq. This practice carries real risks. China.com, the high-profile Chinese portal that celebrated a massive IPO last year, saw its Nasdaq share value drop to $55 from $80 on April 3 to 5. During the same period, Spanish-owned Terra Networks, another darling of the U.S. investment crowd, lost some 16 percent of its value before recovering.
Meanwhile, StarMedia, a U.S.-based but Latin-America-targeted portal, which already took a hit last month, saw its Nasdaq share value drop even further, to $22.81 from $30. When the Nasdaq, the embodiment of the U.S. Internet miracle, hemorrhages one minute and posts healthy gains the next, what does that bode for emerging societies and Internet Economies around the world?
Would a tech meltdown in the States, however temporary, contaminate the fledgling Net Economies in Asia, Africa and Latin America? Steven Schwankert, VP of Virtual China, has written for The Standard about the Internet market there. Schwankert says China is stronger than observers might think. "While the fluctuations of the U.S. markets will certainly affect the availability of capital to go into China projects because of its long-term nature investment, interest in China may actually increase due to U.S. market volatility," he says. "In China, the sheer size of the potential market is enough to attract attention from many investors."
Even the snakes-and-ladders stock prices of Chinese Netcos has failed to dampen his enthusiasm. "The IPOs of those companies are viewed as great successes," he says. "The No. 1 slayer of industry confidence in China is Chinese government policy. American investors would have to pull out en masse before the industry here gets scared."
But another Asia watcher disagrees. Peter Lovelock, head of Maverick, a telecom consulting company in Hong Kong, says a number of Asian companies already have begun to devise business plans "premised on beating the bursting bubble."
Lovelock thinks that if the U.S. bubble bursts, the effect on Asia would be "sizeable." Amolo Ng'weno, CEO of Nigeria-based TelCorp, the parent company of the portal Africa Online, doesn't believe that the volatility will affect sub-Saharan Africa in the same way. "Because of the poor state of infrastructure and the low quality of services provided generally in all industries in Africa, people have been much less likely to bet on a business plan and much more likely to reward proven performance," she says. "The uncertainty in the U.S. markets only reinforces that feeling." Ng'weno says the effects of the U.S. Internet industry will "be more about long-term adoption of technology than short-term trends in the markets.
African investors are very conservative and [so far] have not jumped on the dot-com bandwagon to any great extent." And when it comes to territory south of the U.S., Fernando Rodriguez Alvez, a consultant for Latin American Net strategy company e-Brainstorm, says, "Latin American companies will still want to be listed on the Nasdaq because it represents access to significantly more capital than they can access in Latin America." As Arabia Online's Zeine puts it: "We've seen an incredible amount of activity and investment in the Middle East over the last few months. There are no signs of that investment going away." However, he adds, "Only time will tell."