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Welcome to Profit Confidential • Tuesday, May 22, 2012

Chinese Companies Missing Opportunities in the U.S.

Wednesday, January 24th, 2007
By George Leong, B.Comm. for Profit Confidential

The U.S. market for initial public offerings was strong in 2006. Today, an up and coming IPO market has emerged in China.

The reality is that fewer and fewer major Chinese companies are deciding to list on U.S. markets. What we are seeing in the U.S. markets are lower quality Chinese companies. If you want a piece of the Fortune 100 in China, you will need to be able to trade in foreign markets. This means investors would need to buy Chinese stocks indirectly via mutual funds, exchange-traded funds, or directly via a broker that has access to Chinese-listed stocks.

The surge in the IPO market in China is so impressive that equity markets in mainland China could become more attractive for IPOs than the Hong Kong Hang Seng exchange. IPOs at the Shanghai and Shenzhen exchanges are expected to rise by over 50% this year to over $25 billion, according to Pricewaterhouse Coopers. In Hong Kong, IPO listings are expected to fall over 50% from 2006.

In IPO news, 2007 started with a bang with the debut of China Life A-shares on the Shanghai Composite, up 106% on the first day of trading, making the company the world’s largest insurer based on market-cap.

In Hong Kong, look for China Railways Construction Corp. to raise capital via an IPO valued at up to $2 billion. The company constructs railroads, highways, and airports. In China, I expect strong growth in infrastructure companies.

On the IPO burner, look for the Bank of East Asia (BEA), the fifth-largest lender in Hong Kong to become the first foreign bank to list in mainland China. There is no timetable as to the expected debut for its IPO as many hurdles have to be overcome.

Also look for a $1 billion to $1.5 billion IPO from Yongcheng Coal and Electric Group on the Hong Kong exchange. The China- based company mines for coal, producing 7.94 million tonnes of coal in the January to August period.

Based on what we are seeing, it looks like major Chinese companies will continue to stay at home and bypass the U.S. capital markets. In my view, this means lost opportunities.

 

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Profit Confidential AuthorGeorge is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.

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