It's Official: Wall Street Loves China
When China Life's US$3 billion offer closed at $23.72
per share yesterday, a nearly 20 percent premium over
its initial offer price on its first day of trading, any
doubts that Wall Street was not hot on the China economy
and Chinese companies was removed once and for all.
In 2004, we can expect a Long March of Chinese companies
to Wall Street IPOs. Many Chinese companies will reposition
themselves for western investors, showing them that they
will make a Great Leap Forward with China's explosive
economic growth. Together, they will make a Cultural Revolution
as China joins the 21st century!
Who says that capitalism and capitalism can't work together?
Oops, I mean socialism with Chinese characteristics.
Sorry, I just had to get that out of my system...
Earlier in the week, I mentioned the Ctrip
IPO and compared it to the Orbitz IPO. Both are in
the travel sector, but one is based in Shanghai, and the
other is in the US. Even though Orbitz has much higher
revenues than Ctrip, it closed 3.9 percent lower than
its initial offer price on its first day of trading yesterday.
In comparison, Ctrip closed 87.5 percent higher than its
initial offer price last week.
This means that all these premiums are based solely on
the China angle.
Smart investors will not get all caught up in the hype,
and will take a close look at the China offerings lined
up by their Wall Street underwriters.
China is the big economic story of the 21st century,
but it also has tremendous systemic problems, the biggest
of which is an antiquated and opaque financial system.
While the NDRC (National Development and Reform Commission)
and CBRC (China Banking and Regulatory Commission) have
ministerial powers, and are trying to drive structural
reform of the financial sector, they have to fight domestic
forces who just want to make a financial killing. The
bad side of this story is that the Long March down Wall
Street will buy extra time for these forces who are resisting
reform of the financial system.
Those who will fare well in the long-term are the ones
who can tell the gems from the not very nice stuff.
You read it here first.
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