More Chinese firms heading for NYSE, Nasdaq

By Zhong Nan and Zhang Yuwei (China Daily)
Updated: 2010-12-14 11:05
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BEIJING/NEW YORK - The eruption of Chinese listings in the United States stock markets is set to continue next year.

Statistics from Deloitte show that until the end of November, 28 Chinese companies were listed in the US this year, with 17 listed from September to November. The total amount involved was about $3 billion.

Michael Yang, the chief representative of New York Stock Exchange (NYSE) Euronext Beijing Office, said another six companies have started their roadshows or been listed from this month, bringing the total this year to 34, with 22 in the NYSE and 12 in Nasdaq.

Yang said the expectation of the yuan's appreciation had increased US investor enthusiasm for Chinese companies.

"Even if the growth of listed companies was not promising, the return on investment of the yuan's appreciation would still be substantial," he said.

Wayne Wilbanks, chief investment officer of Norfolk, Virginia-based Wilbanks, Smith & Thomas Asset Management LLC, said emerging markets such as China have been drawing much attention.

"US investors continue to increase their allocations to emerging market investments and China in particular," Wilbanks told China Daily.

"Hedge funds are also involved and the smaller initial public offerings (IPOs) give them a chance to speculate and trade for quick gains."

After 30 years of development, China is gradually shifting its economic momentum from exports to domestic demand. Even during the global economic recession, China's GDP still presented a strong growth of 9.6 percent in 2008 and 9.1 percent in 2009.

Thus, to some investors in the US, they also want to share the high return on investment in Chinese assets by buying Chinese stocks.

"What concerns US investors is the potential growth rate," said Yang. "From their point of view, Chinese companies with a conceivable higher growth rate and a promising future are worth their investment."

However, the IPO record over the past two years has been gloomy, with only four and 10 in 2008 and 2009 respectively,, a Chinese research firm on the financial markets, said.

Taylor Lam, an audit partner with Deloitte in Beijing, said the financial crisis had hindered many potential IPOs.

"Those companies aiming at going public in the past two years re-started their financing processes in the second half of 2009, when the market got warmer," said Lam.

Lam said that compared with the local market, IPOs in the US were more efficient. In China, companies may have to wait between one to three years for permission to list. In the US, companies need between six to 12 months.

Moreover, following the financial crisis, the NYSE has implemented a more flexible financial requirement. "As long as the market value reaches $150 million, and the fund raised amounts to $40 million", a company is qualified for an IPO in the NYSE, Yang said.

Sun Fei, director of China Enterprises Overseas Development Center, said the US stock market could satisfy various financing demand of different companies.

"The total market value of the stocks in the US accounts for almost half of the world, with a quarterly turnover amounting to 60 percent of the world," Beijing News quoted Sun as saying.

"The biggest advantage of being listed in the US market is that companies could raise funds on a much larger scale than in other markets."

As well, companies listed in the US could use follow-on offerings to expand their business and influence.

Lam said it was comparatively easier for listed companies to obtain further financing in the US. "If the market atmosphere permits, it only takes about one month or less to complete a follow-on offering."

However, Chinese companies face challenges, including proper communications with potential investors in two different countries and legal risks.

Lam said high- and clean-tech industries, as well as those in education and e-commerce, are potential for IPOs.

"Some companies in e-commerce have already started their preparation for IPOs in the coming year," Lam said.

Lin Jing contributed to this story.

China Daily

(China Daily 12/14/2010 page16)