Chinese companies head for US listings

PUBLISHED : Tuesday, 11 February, 2014, 1:13pm
UPDATED : Wednesday, 12 February, 2014, 12:17am

Chinese firms are flocking to the initial public offering market in the United States in their biggest numbers since 2010, drawn by soaring valuations for technology start-ups and undeterred by a flare-up in an accounting row between Washington and Beijing.

About 30 Chinese companies could list in the US this year, investment bankers said. That includes China's No2 e-commerce firm after Alibaba. It said last month that it was seeking to raise US$1.5 billion in what might be the second-biggest listing in the US by a Chinese company.

The return to US shores comes on the back of renewed investor enthusiasm for China plays, particularly for internet stocks.

Transaction volume in the country's online retail market jumped 42 per cent last year to 1.85 trillion yuan (HK$2.35 trillion) and was expected to almost double by 2016, figures from iResearch showed.

That has trumped lingering concerns about accounting irregularities and corporate governance issues that have forced many US-listed Chinese firms to be delisted since 2011.

The delistings have prompted US investors to be more discerning about share offers from China this time round. The bar for Chinese companies seeking US deals is higher, improving the quality of recent offerings, bankers say.

But John Hempton, the chief investment officer of Sydney-based Bronte Capital, said a lack of penalties for Chinese firms' past misdeeds in the 2011 scandals meant the potential to find accounting fraud was always there.

While only eight Chinese firms listed in the US last year, raising a combined US$1.1 billion, the returns have been spectacular. Semiconductor solution provider Montage Technology and billed as China's Craigslist, have jumped at least 70 per cent since their debuts. Online sports-lottery operator has nearly tripled in value since listing in November.

Newly US-listed Chinese firms rocketed an average 53 per cent on their debuts last year, consulting firm EY said. The Nasdaq Composite Index has rallied 28 per cent over the past year.

The US market affords mainland Chinese companies options not available in Hong Kong, such as dual-class share structures and the ability to list without having turned a profit. It also offers far more liquidity than the newly reopened listing market in mainland China.