Chinese companies are holding initial public offerings in Germany at a record pace and Europe’s debt crisis is unlikely to derail that trend, according to Deutsche Boerse AG, Europe’s largest securities exchange.
“This year is already the best and we always hope to do better,” Barbara Georg, head of listing & issuer services of the Frankfurt-based exchange, said in a Sept. 20 interview at a Shanghai forum. “I don’t think that will change much. Some Chinese companies IPOs are already in the pipeline.”
Ten Chinese companies have listed on the Frankfurt-based exchange this year, Georg said, declining to say how many more are seeking to sell shares. Chinese companies benefit from “high liquidity, fair valuation and very favorable capital costs” in Germany, she said in a statement. There are 34 Chinese companies listed in Frankfurt, Georg said.
“The listing requirements in Europe are less stringent than other overseas markets such as the U.S. as they are trying to attract high-quality companies amid the current debt crisis,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “That’s why we see a number of companies have gone to Europe for listing.”
Powerland AG, a Chinese manufacturer of bags and travel cases, has plunged 35 percent since its listing in Frankfurt in April. Power equipment maker United Power Technology AG has fallen 34 percent since its debut in June.
European leaders are struggling to contain a sovereign-debt crisis in the 17-nation region that started in Greece and is threatening to engulf Spain and Italy, which on Sept 19 had its credit rating cut by Standard & Poor’s. Germany’s top credit rating was affirmed by Fitch Ratings Sept. 20 after the government agreed on “ambitious” fiscal plans to reduce its debt load.
Germany’s stock market has a market capitalization of $1.23 trillion, according to data compiled by Bloomberg. China’s market value is $3.63 trillion, the world’s biggest after the U.S. and Japan, the data showed. Germany’s benchmark DAX Index is valued at 8.2 times estimated profit, compared with 11.8 times for the S&P 500 Index, the data showed.
China’s benchmark Shanghai Composite Index has dropped 13 percent this year on concern tight monetary policies and stalling global growth will hurt the world’s second-largest economy. Chinese companies have raised 204 billion yuan ($32 billion) from domestic IPOs this year, according to Bloomberg data. They raised 488 billion yuan last year, the most annually since Bloomberg began tracking the data in 1999.
China’s stocks have also fallen before Sinohydro Group Ltd.’s IPO, possibly the biggest in more than year. The nation’s biggest builder of dams will start selling as many as 3.5 billion shares in Shanghai on Sept. 26, according to a statement to the city’s stock exchange.
Deutsche Boerse is seeking to combine with NYSE Euronext to create the world’s biggest exchange operator. The merger is awaiting regulatory approvals.
“Many Chinese companies currently have firm intentions of an IPO in Frankfurt but have had to postpone their plans as a result of market turbulence,” Georg said in the statement. “We expect more Chinese IPOs by next year at the latest.”