China: World's IPO leader

In case you’ve been in a coma the past 20 years, China is booming:

Over the last five years, Chinese companies have raised about $210 billion globally through initial public offerings… American companies, by contrast, have raised $184 billion… In 2009, 11 of the 14 foreign public offerings made on United States exchanges were of mainland Chinese companies…

Just two companies — the Asian arm of American International Group and the Agricultural Bank of China — that could go public this year are expected to raise a total of $30 billion to $40 billion, about what American companies raise in a decent year.

“A fund manager with a global portfolio is being reckless if he doesn’t have exposure to China,” says Mark Machin, co-head of Asian investment banking at Goldman Sachs. “It’s going to be the world’s second-largest economy.”

…According to Forbes, China had 79 billionaires in 2009, up from just one in 2003.

But the potential for Enron-esque, WorldCom-esque, Madoff-esque scandals is very real (though that’s obviously also true here in America):

Critics have long warned about unknowns that already come with investing in Chinese companies: insider trading scandals, the lack of transparency, poor regulatory oversight, volatile prices and a lack of clarity on shareholder rights.

“Are you really getting disclosure?” asked Carl E. Walter, a Beijing-based investment banker and co-author of Privatizing China: Inside China’s Stock Markets.

Posted by James on Friday, February 12, 2010