Fund managers cast wary eye on valuations of Chinese internet firms

Fund managers in Hong Kong have turned cautious on China's red-hot internet sector as valuations for such firms approach nosebleed levels.

Their concerns were heightened when Sina Weibo said on Tuesday it plans to raise about US$500 million in a US listing at a time when its user growth has slowed to the lowest level ever.

The number of users on China's Twitter-like microblogging service rose just 4.2 per cent between September and December.

It also comes in the wake of some recent big ticket acquisitions in the sector, with Alibaba snapping up Autonavi in a deal that values the mapping app's maker at US$1.58 billion, and Alibaba competitor Tencent investing HK$1.5 billion in logistics and trade centre operator China South City Holdings.

"The mainland internet sector is getting much closer to its peak valuation," said Seth Fischer, chief investment officer with Oasis Management, a Hong Kong-based hedge fund.