‘Western concept’ Chinese shares see US resurgence

‘Western concept’ Chinese shares see US resurgence

Staff Reporter

2013-11-10

Chinese companies seeking a stock listing in the US have seen a resurgence in 2013, but most US investors are not pursuing China concept shares but rather seeking Chinese companies with an “American shadow,” the Shanghai-based First Financial Daily reports. On Oct. 31, 58.com, a Chinese local classified-ad website, launched an IPO with a price of US$17, giving it a market value of more than US$1.4 billion. The company’s share price jumped 42% on debut.Qunar Cayman Islands Ltd, a travel-booking service controlled by Chinese internet search giant Baidu, jumped 89% on Nov. 1 after selling American depositary receipts at US$15 each, above an initial target of as much as US11.50.

Five Chinese firms have completed US IPOs this year, rallying an average 43%, according to data compiled by Bloomberg. Several more Chinese companies are planning to go public in the US.

The booming IPO issues are in sharp contrast to the last few years, when many Chinese companies listed in the US were hit by accounting scandals which either caused their shares to plummet or forced them to delist altogether.

As shares have kept on rising this year in the US this year, US exchanges have become the best place for Chinese firms seeking overseas IPOs. Marc Iyeki, in charge of listing at the New York Stock Exchange, said the US IPO market has been prosperous in 2013, with nine firms launching IPOs in the same week and plenty more companies expected to float in the last two months of the year.

Rather than saying China concepts shares have re-emerged to attract US investors, it’s probably better to say that US investors are betting on “Western concept shares,” referring to those Chinese companies which have copied successful business models of Western companies and become success stories in China, the report said.

For example, Baidu took Google as its model, as did Sina Weibo with Twitter, and Renren with Facebook. The latest is 58.com, which took its lead from Craigslist, CNN recently noted.

US investors prefer to buy those Chinese “mirror companies” which follow certain US business models and are not interested in buying Chinese firms with their own and unfamiliar style, said US stock expert Mark Otto.

The successful IPOs by 58.com and Qunar signaled the appetite for Chinese stocks remains unshaken by cases such as Muddy Waters’ allegations of fraud against NQ Mobile. However, insiders warned that Chinese companies must learn to make sure their integrity and corporate governance are beyond reproof, otherwise another round of shorting Chinese shares will not be long in coming.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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