The Best IPOs in China
The Best IPOs in China: How an IPO in China Can Make You Rich in New York
A Taipan Publishing Group Strategy Report
by Irwin Greenstein, Senior Research Analyst, Taipan Publishing Group
Chinese IPOs are going for dual listings on stock exchanges in Hong Kong and New York, giving investors a back door into an explosive IPO marketplace. If you ignore these rare dual-listings and you could miss out on a huge wealth-creation opportunity from the best IPOs in China.
China’s IPO market is on fire.
When you tally it all up, China raised 23% of all the IPO money in 2006. That money represents new wealth for shareholders. Now imagine if you were given a shot to put yourself into that torrential flow of new money coming out of China -- but with the safety, convenience and peace of mind of trading a stock in New York.The Best IPOs in China: The Lure of China’s IPO Boom
Most American investors are torn between the lure of China’s IPO boom, and the fear of navigating Chinese stock exchanges. This is perfectly understandable.
Taipan Daily "For more than a year I've followed your results and comments... the only word I can use to describe my experience is 'fantastic'." -- John, member Taipan Daily is your FREE resource for late-breaking investment opportunities to help you beat Wall Street to the profits. Filled with investment analysis and insight from every sector (from blue chips to small caps... options to ETFs... emerging markets to the tech sector), Taipan Daily delivers just the right mix of safe opportunities with the fast-moving plays, so you have an insider's edge over the Street... and other investors. As a Taipan Daily member, you'll also receive the Chart of the Day alerts, delivering the best-performing investment opportunities in a few easy steps. Enter your e-mail address below and click the Join Us button to begin receiving your e-alerts. |
But what many American investors don’t know is that they can cash in on China’s lucrative IPOs by trading many of those stocks in New York through their favorite broker -- without having to pay higher commissions or currency exchange premiums.
The action has been so hot and heavy that the NYSE actually opened a satellite office in Beijing in December 2007. That followed on the heels of the Hong Kong Stock Exchange opening its trading doors to investors in mainland China.
The next day, Hong Kong’s Hang Seng index jumped 5.93% -- the biggest one-day gain in almost a decade.The Best IPOs in China With Huge Volumes
Now, any investor hungry for a hot IPO knows that the one sure thing to drive a new offering through the roof is volume. So all you need to do is step aboard the dual-listing bullet train as perhaps the fastest way to cash in this incredible IPO phenomenon.
For individual investors, the whole idea of a dual listing may sound a bit baffling. But there are solid business reasons for doing it. The combined, higher volume of trading, plus the legitimacy of a U.S. listing, gives these Chinese IPOs greater fire power in their own home market.
Once a Chinese IPO lists on the NYSE, Amex or Nasdaq, it starts to get covered by the major brokerage firms on Wall Street. The research is broadcast out to investors, the media and bloggers, who in turn spread the good word.
A dual-listing IPO can fan the flames of profitability, creating a wildfire of volume on two continents that could make investors rich in this 24-hour ecosystem of greed.The Best IPOs in China are Opening Higher on Wall Street
When the last trade of the day is made in New York, and the stock goes on to trade like crazy in China, the chances are pretty good it will open significantly higher the next morning on Wall Street.
It’s the closest you’ll come to non-stop trading -- your entrée into an IPO world of wild, insane volumes that can send a stock straight to the moon.
"Anything to do with China has been on fire," states Sal Morreale of the brokerage firm Cantor Fitzgerald in Los Angeles.
"The biggest IPOs have been Chinese companies, and I just don't see that changing," observed Gokul Laroia, head of Morgan Stanley's capital markets in Asia.
|
The Demand for The Best IPOs in China Is off the Charts
Hong Kong investors, emboldened by big first-day gains by recent China IPOs, lined up in a frenzy to apply for shares of the China Life IPO.
Scores of eager investors could be seen lugging China Life's 1,000-page prospectus around town. Most of these folks were turned away as the IPO ended up being 25 times oversubscribed.
And get this: In May 2006, the Bank of China (BOC) raised nearly $10 billion through its IPO on the Hong Kong Exchange.
This made it the world's largest IPO in six years, according to Forbes.
Despite the size of the offering, the Bank of China IPO was heavily oversubscribed. In fact, Reuters reports that only one in 76 investors was able to get shares.Feeding Frenzy for The Best IPOs in China
According to The Financial Times, the China's Bank of Communications IPO was heavily oversubscribed. Only one in 205 people got shares.
The IPOs are so hot, that when China Construction Bank went public in Hong Kong last year, J.P. Morgan enlisted diplomat Henry Kissinger to help get them a piece of the deal.
The China Daily reports that it's not uncommon for Chinese IPOs to double or triple on opening day.
Unfortunately, most U.S. investors find it daunting to get in on the first trades of Chinese IPOs if they have to go through the Chinese exchanges. Heck, it can be intimidating enough just to navigate a menu in a Chinese restaurant.
The Key to The Best Chinese IPOs
The key to cashing in on China’s IPO craze is to isolate Chinese companies that have dual IPO listings in China and New York.
Here are three examples of how this line of attack can pay off for you…
In 2004, China Netcom Group Corporation Limited launched a $1.3-billion IPO on both the New York Stock Exchange (NYSE) and HKSE. You could’ve jumped in on the IPO in New York, leveraging China’s IPO-mania.
The results could’ve been staggering, as you can see in the following chart (CN: NYSE). And the trade would have been easy as pie.
In February 2001, China National Offshore Oil Company Ltd (CNOOC) kicked off its dual IPO campaign in Hong Kong and New York (CEO: NYSE). American investors with vision saw the opportunity to buy up shares in New York just as easily as any other stock. Here’s how they made out…
China Life Insurance Company (LFC: NYSE) hit the boards with its 2003 IPO that bolted 25% in its first day of trading. As you can see in the following chart, this IPO had real legs.
These three dual-listed Chinese IPOs are a stock-picker’s dream. Anyone who got in on the IPO of China Life, CNOOC or China Netcom could have easily struck it big.
But a rash of regulations is changing the dual-listing landscape, making big winners harder to find.
The Best IPOs in China are Hard to Find
The Sarbanes-Oxley Act imposed harsher disclosure restrictions on U.S.-listed companies. The financial and bureaucratic hardships have forced many Chinese companies to list with the London Stock Exchange rather than wrangle with U.S. regulators.
And in China, bankers and lawyers are grappling with regulations to limit the number of Chinese companies that could list on offshore stock exchanges.
The regulations took effect in Sept 2006. They stipulate that Chinese firms wanting to sell shares abroad seek approval from the China Securities Regulatory Commission (CSRC), an extremely arduous process.
Instead, Chinese companies with an eye on dual listings are incorporating in countries such as Singapore, Bermuda or the Cayman Islands. The maneuver is thorny, often leading IPO candidates right back into the hands of the CSRC.
The Best IPOs in China: Will China Repeal?
There are loopholes, and Chinese companies are finding their way through them.
Many experts question whether China may repeal the law, making it easier for you find great dual-listed Chinese companies.
Until then, finding the next hot China IPO on Wall Street could become a real challenge. It’s going to take scalpel-sharp market intelligence and a sixth-sense about IPOs to corner the market. The editors and analysts at Taipan Daily are the team that could help you become a top notch IPO investor. So use this opportunity to take advatage of the biggest IPOs on the market.
If you’re truly interested in the extraordinary potential of Chinese IPOs listed in the U.S. and China, sign up for your FREE Taipan Daily e-letter. Since 1983, Taipan has covered the international waterfront for stocks, bonds and options. And with Chinese IPOs becoming a breeding ground for stock-market millionaires, you can get in on the game right from the comfort of your home office. Don’t delay. Sign up for your FREE Taipan Daily e-letter and receive the bonus Chart of the Day alerts. |
Originally published January 29, 2008.
More Articles from Irwin Greenstein of Taipan Publishing Group
Ethanol Alternative Fuel Investments: Let Uncle Sam Make You Rich in a Wicked Bear Market
Gains in a Recession: Three Market Picks
Trading Research Services: How You Can Play the Global Markets
Useful Links about The Best IPOs in China
IPOs Hit By Nov. Market Woes, But On Pace For A Strong Year
Bank of China I.P.O. Raises $9.7 Billion
Where China's Top IPOs List: Offshore
Copyright 2007-2008, The Taipan Publishing Group, Taipan Daily and Chart of the Day, 808 St. Paul St., Baltimore, MD 21202. All rights reserved. No part of this report may be reproduced or placed on any electronic medium without written permission from the publisher. Information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed.