Chinese companies making their U.S. stock-market debuts in the past year have rewarded their buyers with the best returns among global peers, fueled by demand for Internet and e-commerce shares from Asia’s biggest economy.
The 10 biggest Chinese companies that completed initial public offerings in the U.S. in the past 12 months have returned an average of 44 percent since their offer dates, compared with 25 percent for all U.S. IPOs of more than $100 million in the same period, according to data compiled by Bloomberg. 58.com Inc., which provides online classifieds, has surged 140 percent since its October IPO and Autohome Inc., a car information website, has gained 110 percent since December.
The new Chinese technology companies are benefiting from investor bets that they can profit from the country’s expanding consumer sector and grow quickly even with less state help. Companies such as Alibaba Group Holding Ltd., China’s largest online marketplace which filed for a U.S. listing last month, may get a boost as President Xi Jinping seeks to increase the role of services in the economy, while reducing its reliance on the credit-driven construction that has propelled growth.
“There is a lot of investor excitement around the group, especially ahead of Alibaba,” Kurt Ayling, a technology, media and telecom analyst at New York-based Susquehanna Financial Group LLP, said in a June 6 interview. “Investors generally feel they need some sort of exposure in China once again.”
Of the 16 Chinese IPOs on U.S. exchanges over the past year, 12 are by companies focused on Internet technology or web-based services including online shopping, according to data compiled by Bloomberg. Retail site JD.com Inc. attracted $1.78 billion in a May offer and social media platform Weibo Corp. completed a $285.6 million debut in April as Alibaba prepares what may be the biggest IPO ever.
The CSI Overseas China Internet Index, a gauge of Chinese dot-com companies, has rallied 6.6 percent this year, compared with a 4.2 percent drop in the Dow Jones Internet Composite Index.
“If you look at the technology and Internet sector, investors were getting hit hard in the U.S. during the first half of the year and needed to search for returns elsewhere,” Ayling said. “China is the logical next stop.”
Internet sales in the world’s second-largest economy are surging as online sellers led by Alibaba are luring more of the nation’s 618 million users. E-commerce sales jumped 52 percent in the first four months of 2014 from a year earlier, while broader retail sales gained 12 percent, which represented the weakest start to a year since 2004, according to the nation’s statistics bureau.
Favorite China IPOs in the U.S. are those “linked to the consumer discretionary and technology/e-commerce sectors,” Josef Schuster, the founder of IPOX Schuster LLC in Chicago, an IPO research firm, said by e-mail on June 6.
JD.com, China’s second-largest e-commerce site, surged 40 percent since its IPO, while Jumei International Holding Ltd., a Beijing-based online seller of beauty products, jumped 35 percent after raising $245.1 million on May 16.
With an estimated market value of $168 billion, Hangzhou, China-based Alibaba could raise as much as $20 billion, topping a $19.65 billion offering by Visa Inc. in 2008, data compiled by Bloomberg show.
The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. climbed 0.4 percent last week to 102.52, while the iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., advanced 1.1 percent to $37.24, extending its gain into a fourth week.
Real-estate related Chinese equities rose in New York last week after the China Banking Regulatory Commission vowed to expand loans and cap borrowing costs. Lending to small businesses, major infrastructure projects and first-home buyers will be a priority, the CBRC said.
Xinyuan Real Estate Co., a Beijing-based property developer, jumped 4.1 percent on June 6 to cap a 10 percent weekly rally. Leju Holdings Ltd., an web real estate service provider that made its U.S. debut in April, added 3.5 percent June 6 to $11.74, taking its gain since an April IPO to 17 percent.
The Hang Seng China Enterprises Index, also known as the H-share index, advanced 0.6 percent to 10,406.79 today, the highest level since April 10. The Shanghai Composite Index was little changed at 2,030.50 after slipping 0.5 percent last week.
For Chinese IPOs in the U.S., “it will be more difficult to sustain the outperformance,” according to IPOX’s Schuster. Chinese deals will get higher initial valuations, narrowing the discount to their counterparts, he said.