Chinese firms are going home to China, further eroding the financial integrity of the US economy.
So Long Big Apple! Chinese Firms Look to Drop NYSE Listings, Return Home
00:10 06.06.2015(updated 03:15 06.06.2015)
Many Chinese tech executives are betting on higher share valuations in China. They also hope to avoid being ensnared in a legal mess when Beijing formally outlaws foreign shareholder control of firms in protected tech sectors.
A Chinese exodus would mean Wall Street underwriters are going to miss out on profitable fees, like the $300 million generated by the $25 billion IPO of e-commerce giant Alibaba – the world’s largest initial public offering ever.
The numbers certainly are enticing. China’s tech-driven ChiNext composite index has gained nearly 180% this year, eclipsing the 30% rise in the Nasdaq OMX China Technology Index that tracks offshore listed mainland firms, Reuters reported.
Firms listed on the Nasdaq index get an average share price equal to 11 times their earnings. On ChiNext, they get 133 times. Chinese executives attribute the disparity to US ignorance of China.
“American investors don’t understand the business model of Chinese gaming companies,” a senior exec of one firm planning to move from New York to China was quoted as saying by Reuters.
Analysts predict fewer and fewer Chinese companies trying to list in New York.
“The possibility of stirring interest among US investors is slim,” said Shu Yi, CEO of Beijing-based advertising technology company Limei Technology, which abandoned plans to list in New York and now is hoping to go public in Shanghai or Shenzhen.
Couple that with Chinese Premier Li Keqiang’s call for tech firms to return home. those with “special ownership structures,” referring to the contractual loopholes employed by many Chinese firms to evade restrictions on foreign ownership.
Previously, Chinese regulators prohibited many firms from listing in the United States. The China Securities Regulatory Commission used to require that any company be profitable for several years before listing, which eliminated most Chinese internet companies.
But Beijing is aiming to make Shanghai a global financial center among the likes of London, Hong Kong and New York by 2020, and to do that, and it has to make room its most innovative companies.
“The obstacle to coming back has been removed,” said a representative from China Renaissance bank in an email to Reuters. “The issue is not whatever valuation you can get in China. Hot market themes are fleeting.”
Asian Shares Advance as China Steadies After Crash; Eurozone Equities Flat
14:23 29.05.2015(updated 14:28 29.05.2015)
Kristian Rouz – Most equity markets in Asia-Pacific posted gains on Friday after mainland China halted the previous day’s stocks after a significant plunge.
Investors are still wary of a large-scale correction in China’s stocks, bearing harmful spillovers for other regional markets, the factor limiting expansion in better-faring Asian economies. Europe was flat mostly, as negative market consequences of the Greek concerns were equaled by the moderate influx of investment money from Asia and, to a lesser extent, North America.
The stock rally in Asia-Pacific made up somewhat for the regional markets’ first monthly decline this year, pushed up by a weaker yen, at its 12-year lowest against the dollar, and a rebound in commodities. The MSCI APEX 50 Index rose after three days of losses, adding 0.2%, paring its monthly decline to 1.1%. The Shanghai Composite Index was up 0.5%, possibly after Beijing’s intervention, after having collapsed 6.5% the day before.
“The correction is not yet over,” David Dai of Nanhai Fund Management in Shanghai said. “Yesterday’s slump was too rapid, so many investors didn’t have time to flee. Many are still seeking an exit. The market has risen too much, and too fast, so the confluence of bad news is causing panic selling.”
Australia’s S&P/ASX 200 Index rose 1.1% on the commodities’ advance as crude oil added 0.8%. Energy stocks led Australian rally. In Korea, the Kospi Index added 0.2% as a stronger dollar environment is favourable for the nation’s export-reliant manufacturers. A similar situation pushed Japan higher, with a broader Topix Index up 0.1%, at its highest since October 2007.
The Japanese yen rose a mere 0.04% overnight, still just below its 12-year lowest at 124.46 against the dollar, showcased during Thursday’s trading. This week the yen retreated almost 2%. Even though the Bank of Japan’s monetary policies remain ultra-accommodative, the nation’s inflation is still dead at zero.
Japan’s Nikkei 225 Index hit its 15-year highest on Friday after 11 straight days of gains. The index also has been expanding five last months, and investors are in a bull market here as the Japanese manufacturers are promising greater returns per share amidst a very favourable foreign trade situation.
In the Eurozone, Greece is a major concern, and the situation is very complicated with more bets now that Athens will default eventually. Nonetheless, the indebted nation’s government is still hoping to reach a cash-for-reforms deal with its creditors by Sunday.
The Stoxx Europe 600 Index has been performing at its best since February so far amidst an influx of investment money. Solid economic growth in the region’s biggest economies provides a reliable backing for the stocks, so there is no risk of bubble here thus far, as opposed to the North American situation.
The common currency added 0.1% to $1.0957, having hit its one-month lowest at $1.0819 just several hours prior.
European shares were in the red at the open on Friday. Some investors are taking their time till next week as the resolution of the Greek crisis is due this coming weekend. There is no legit reason to sell all across Europe as fundamentals look good and global picture favourable, however, not many market participants are willing to buy, cautious of a still possible Greek collapse. What is happening now is a market correction, preparing for the worst outcome of the Greek situation.
The Stoxx Europe was down 0.7%, and Greece’s ASE Index declined the most, down 1.5%. The nation is seeking a way to pay off $1.75 bln to IMF in June. In London, the FTSE 100 Index was down 0.36%, in Frankfurt, the DAX Index retreated 1.30%, while the French CAC 40 Index lost 1.08%.
China Becomes Second Stock Market Superpower – German Newspaper
The New York Stock Exchange should get ready for a serious competitor. The fact that the Chinese stock market will finally open to the outside world raises concerns among Americans as China is likely to become a very attractive place for major investors, writes major German daily Die Welt.
The Shenzhen stock exchange is expected to become directly linked to the Hong Kong stock exchange, following the stock market in Shanghai. Thus, all three major Chinese stock markets will merge, creating a new global center of stock trading, comparable to Wall Street.
“It would be a real breakthrough,” Christina Chung, chief strategist at Allianz Global Investors, said.
In case of unification, a total capitalization of the Chinese stock market will reach $13 trillion. The country will become the second largest stock market superpower after the New York Stock Exchange ($16.5 trillion) and a serious competitor for Wall Street.
The Chinese market has always been quite large, but the trade in China was carried out “behind high walls” and the market itself was divided into three parts. In Shanghai and Shenzhen, only Chinese citizens had the right to trade, while foreign access to the stock exchange was restricted. Hong Kong, by contrast, was a place exclusively for foreigner traders, and the Chinese had no opportunity to invest their money there.
In November last year, the first link between the Shanghai and Hong Kong stock exchanges was established. Thus, investors from all around the world got an opportunity to buy and sell shares in Shanghai via Hong Kong.
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