to begin trading on Hong Kong's GEM

Want to chat with the celebs? Find out the latest gossip from the Chinese entertainment world? could be for you. Shares in the company begin trading tomorrow.

Trading begins Thursday in the shares of, an entertainment portal that's betting it can compete with magazines, TV and other internet sites to provide gossip and information on Chinese celebrities.

The Hong Kong-based company sold 170 million shares at HK$1.18 each to raise HK$200.6 million ($25.7 million). The shares will trade on Hong Kong's Growth Enterprise market for start-up and high-tech companies.

Stareastnet aims to become a global Chinese entertainment content provider using the internet as well as video and audio streaming technologies. The site's offerings include live celebrity chats, restaurant information and clips from movies. In future it plans to offer online ticketing, shopping, auctions and fan clubs. It could be a popular site, analysts say.

"Hong Kong is flash central," says Antonio Tambunan, internet analyst at Deutsche Bank in Hong Kong. "People love anything to do with celebrity and gossip, so the concept is great for the end consumer."

Still, popularity doesn't necessarily lead to profitability. Since its inception in February 1999 through February 2000, the company lost HK$55.9 million. For the month ended March 31 it lost about HK$24 million. And it expects to continue losing money as it develops content and increases the fees it pays to its 150 contracted celebrities. Since the global decline in technology stocks, investors are less willing to tolerate indefinite losses.

"The question is, will the number of  people who access the sites be large enough to sustain investment in the company?" says Tambunan.

That will to some extent depend on the rate at which Chinese consumers take up audio/visual technology. So far, only 19% of internet users in mainland China and 5% in Hong Kong use multimedia functions, according to Hong Kong-based research company iamasia.

Stareastnet plans to use HK$75 million of the sale proceeds to develop entertainment content. It will spend HK$42 million on technology and about HK$33 million on marketing. Some HK$5 million will be used to take stakes in related companies and HK$3 million will be used to develop e-commerce businesses and HK$10 million for working capital.  

The company is controlled by five major shareholders: Star East Holdings, Hikari Tsushin, Hanny Holdings, PCCW and Gold Miracles. They have collectively reduced their holdings to 83% from 100%.

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