The Portals Into China.

Internet stocks are already retro chic, none more than those with a MADE IN CHINA label. The big three Chinese Internet portals, Sina, Sohu and Netease, went public on New York's NASDAQ exchange at the worst possible time, right after the dot-com bust of early 2000. They all but vanished on arrival, and a year ago all were trading at less than two bucks. Since then, the prices of all three have risen by as much as 3,000 percent and closed at the end of September up by at least 3,400 percent, as investors begin to take another look at the world's fastest-growing Internet market. "The Internet is an emotional term, and China is an emotional place for a lot of people," says Duncan Clark, a Beijing-based telecom consultant and former adviser to Netease. "So put those together and it's a double whammy."

Others call it another Internet bubble. Analysts warn that the Chinese portals are wildly overvalued, and that even some of their top executives are selling off lots of shares. The three portals all earned less than $10 million in the last quarter, and yet the market value for Sina and Netease is well over $1.5 billion; for Sohu it's more than $1 billion. "The valuation we're seeing is mad," says Morgan Stanley economist Andy Xie, who expects a crash. "It's not going to be pretty."

Yet there are some not so crazy reasons why investors might be seduced. These stocks offer global investors an unusually safe way to invest in China's booming economy. The Chinese stock market is largely off-limits to foreigners, and it is virtually unregulated, dubbed by some Chinese as an "ATM" for corrupt company officials who need quick cash. Listing on the NASDAQ gave the portals credibility, and the China tie lends them an air of limitless opportunity. Nearly 60 million Chinese citizens already have online access, and according to government figures, that number will reach 100 million by 2005. More than 220 million have mobile phones, for which the portals can provide Internet content. "All three of our companies are seeing triple- digit growth," says Hurst Lin, chief operating officer for Sina. "So the investors are finally coming around to say, 'Well, these guys have finally realized the potential of the China market'."

It took some time before the portals figured out how to turn a profit. At ...