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Stock Market Commentary & Forecasts, Financial & Economic Analysis

Welcome to Profit Confidential • Tuesday, May 22, 2012

Trends in the East

Thursday, May 10th, 2007
By George Leong, B.Comm. for Profit Confidential

The Chinese IPO market continues to attract massive capital inflow. Smaller Chinese companies are deciding to list in U.S. markets, which has helped to drive IPO demand in China and Hong Kong. This means investors would need to buy Chinese stocks indirectly via mutual funds, exchange-traded funds, or directly via your broker, who has access to the Chinese-listed stocks.

 This year already saw the successful debut of China Life A-shares on the Shanghai Composite, which is now the world’s largest insurer based on market-cap.

 But in a recent move that could help drive IPOs on the main Shanghai Composite Index (SCI) or B-class Shenzhen Exchange, the Chinese government has altered its IPO listing policy. Under the new plan, only those Chinese companies that plan to raise over $1 billion or seek a dual listing on the SCI or Shenzhen Exchange will be allowed to pursue an IPO on the Hong Kong Hang Seng index. Clearly, the intention of this unofficial policy is to pressure companies to list in China and open up markets to mainland Chinese investors, who may have been shut out in other IPOs.

 The size of the SCI and Shenzhen Stock Exchanges has surpassed the market value of all Hong Kong Exchanges and Clearing Limited. With a current market cap of about $1.78 trillion, the SCI and Shenzhen is greater than the $1.77 trillion assigned to those in Hong Kong.

 Watch for a highly successful and oversubscribed $5.7 billion IPO from China’s CITIC Bank, the country’s seventh-largest lender. The IPO will debut on both Hang Seng and the SCI.

 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 time for its IPO, as many hurdles have to be crossed.

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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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