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Last Updated: Monday, 21 February, 2005, 10:07 GMT
China's Shanda buys stake in Sina
Chinese computer characters
China's economic surge is boosting demand for computer services
Chinese online game operator Shanda Interactive Entertainment has bought a 20% stake in Sina, the country's biggest internet portal firm.

The move may be a precursor to a full takeover, with analysts saying that a better-known international firm may also now show an interest in Sina.

Shanda said that it may boost its stake in Sina, even buying it outright.

A merger would create a firm that offers online role-playing games, news, entertainment and wireless messaging.

Global power?

Sina said that the purchase of a stake by Shanda would have no impact on its business.

Even though Shanda has 20% of Sina, they still have quite a long way to take full control
Wallace Cheung, DBS Vickers

The board of directors said in a statement that it would "continue to act in the best interests of all the company stakeholders, including shareholders, employees and customers".

Both companies are listed on the New York Stock Exchange's (NYSE) technology-dominated Nasdaq index.

In a filing with the US Securities and Exchange Commission, Sina said its shares were purchased between 12 January and 10 February for about $230m.

Rumours about a possible takeover boosted Sina's shares by more than 10% on Friday. They added an extra 6.4% to $27.24 in electronic trading after the trading session had finished.

And there may be more gains amid bid speculation when trading resumes in New York on Tuesday after Monday's public holiday, analysts forecast.

"There could still be some potential parties that could still counter bid," said Wallace Cheung, an analyst at DBS Vickers.

"Even though Shanda has 20% of Sina, they still have quite a long way to take full control."

However, Mr Cheung noted that a foreign company trying to take control of a Chinese internet portal firm, with its ability to filter and pass on news, may not be viewed very favourably by Beijing.

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