The share price of China's three major Internet portal companies has dropped for five consecutive sessions on the Nasdaq market because of the outflow of illegal capital.

Sina corp closed at US$31.93 Tuesday compared with last Tuesday's US$36.72. Sohu.com Inc's share price was down from that day's US$40.80 to US$34.65 Tuesday, while Netease.com Inc stood at US$46.75 after its historic record of US$50.76 five sessions ago.

An analyst predicted that the decline will continue for a long time and the price will drop to about US$20, or half of their current level.

"Some illegal funds from China started to retreat after yielding a satisfying return," said Wu Qihua, stock market analyst from Hemoo Investment & Business Consulting Shanghai office. "That will continue to drag down the share price of the three portals."

Chinese people are not allowed to invest in foreign stock markets according to related laws, but Wu said some funds managed to enter the Nasdaq market through illegal channels from China's Zhejiang and Jiangsu provinces. The funds bid up the price of the Chinese-language Websites.

"Sina, Sohu and Netease haven't gained the recognition of international fund managers yet, so their price slid when the Chinese capital left," Wu said.

But Wu declined to elaborate how the illegal Chinese capital flowed into Nasdaq.

A year ago, the three companies were struggling to maintain above the one US dollar delisting line. Sina's share price was around US$1.70 last August while Netease and Sohu were roughly US$1.60 and US$1.20 respectively.

"Afterwards, rapid growth in the short message system business boosted the profits of these companies, which triggered the jump in their share prices," Wu said.

Sina's non-advertising revenue, in which paid short message services account for a major part, jumped five times to US$16.5 million in the second quarter. That represents 64 percent of the company's total revenue.

Non-advertising income of Sohu was US$12.5 million in the second quarter, or 65 percent of total revenue. The figure grew 346 percent year-on-year. That of Netease grew by 280 percent from a year earlier to US$13.9 mil-lion, or 85 percent of total.

What is more, industry officials warned the rapid growth of short message services in China have attracted more service pro-viders. That will inevitably cause the profit margin to decline, and affect the pro-fitability of the three portals in the future, insiders say.

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