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Chinese IPOs in US to recover, not soon

(Xinhua)

08:11, September 17, 2012

Chinese companies will return to the US stock market despite a sharp decline of initial public offering activities in recent months, but the recovery may not begin until the second quarter of next year, according to market analysts.

Only one Chinese company - VIP Shop - went public in the US in the first half of 2012. At the same time, at least 12 Chinese stocks announced plans to buy back their shares from the market amid plunging share prices.

The bleak outlook was in contrast to the "Chinese concept stocks" frenzy in 2010 - 46 Chinese companies went public in the US in that single year. But since 2011, 33 companies had begun to take themselves private. Fourteen have pulled out from the market so far, according to ChinaVenture Investment Consulting Group and other consulting firms.

The value of the listed Chinese companies were being underestimated and many of these companies could not see any benefit of overseas listing, according to Wang Ran, CEO of China eCapital Corporation, a Chinese investment bank.

"The low valuation had affected the company's financing plans, the morale of the management, and made us rethink whether it was worthwhile to stay on the market for such high costs," Yang Tianfu, chairman of Harbin Tech Full Electric CO Ltd, told reporters. The former US-listed electric motor maker went private in 2001 amid fraud scandals alleged by short sellers.

Scott Cutler, executive vice president of NYSE Euronext, told Xinhua Thursday in Beijing that the significant decline of Chinese IPOs has a lot to do with general trust and confidence in the financial market and confidence in the companies' own financial statements.

"Unfortunately, the mistakes or fraud by a very few number of companies has impacted the perceptions that the investors have on all companies from China."

Cutler, also a co-head of US Listings and Cash Execution at NYSE Euronext, said the only way that the companies are able to restore that trust and confidence is by being more transparent, and more communicative with the market.

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