For anybody who has followed the roller-coaster world of Chinese Internet IPOs this year, the pattern is already distressingly familiar.

Last week, Tencent Holdings, an instant-messaging outfit based in the southern Chinese city of Shenzhen, made a big splash on the Hong Kong market. Its initial public offering, which was arranged by Goldman Sachs, was 158 times oversubscribed.

When the stock started trading on June 16, the price jumped 12%, and its volume of almost 440 million shares made it the second-most traded stock on the Hong Kong bourse. But by June 18, it had already given up most of its gains and sank below the threshold of HK$4, close to its listing price of HK$3.70.

Tencent’s up-and-down performance shows how investors are alternately intrigued and frightened by the Chinese Internet market. Following the impressive results of China’s first generation of Net companies — portals such as the Nasdaq-listed Netease, Sohu, and Sina were among the best overall performers in 2002 and 2003 — a new crop of Chinese Internet plays is now emerging.

Their businesses vary. Some specialize in delivering Internet content to cell phones, others in providing online games to PCs, still others produce chips for the gadgets that enable the Chinese to get online. But a common theme for them all is the belief in spectacular Internet growth in China. The country now has the world’s second-largest Net population, and within a few years it’s expected to surpass the current No., the U.S.

More here.