A Chinese Banquet For NASDAQ

The exchange is outpacing major rivals in lining up new listings from the mainland

When Chinese wireless-services provider Hurray! Holding Co. (HRAY ) decided it wanted to raise $70.5 million in the equity markets earlier this year, it went right to NASDAQ. Why? Key reasons were NASDAQ's global reputation as the market for the tech world and its fondness for smaller, less-tested companies. "NASDAQ is a key exit [vehicle] for the entrepreneurs and investors that finance these companies," says Steven L. Toronto, managing partner of the Beijing office of Morrison & Foerster, a San Francisco law firm that helped Hurray on its way.

The New York Stock Exchange, the London Stock Exchange, and New York-based NASDAQ are all in hot pursuit of fresh listings of fast-growth Chinese companies. The NYSE will open a new office in Beijing in October. But NASDAQ has outpaced its rivals. Since the beginning of 2004 it has signed up 16 Chinese companies. Its biggest coup by far: Baidu.com Inc. (BIDU ), the Beijing-based Internet search-engine firm that went public on NASDAQ Aug. 4 at $27 per American Depositary Receipt, climbed to $154, and now trades at about $83.

The NYSE can claim just two new listings in the same period. The LSE has added 12, all but one on its NASDAQ-like Alternative Investment Market. NASDAQ's success has made it a force in China. "Ten years ago nobody actually knew NASDAQ," says Lawrence Pan, a former Morgan Stanley (MWD ) investment banker who took the helm of NASDAQ's China operations in March. "Right now there's a lot of awareness."

For its part, the regal NYSE sniffs at its competitor's success, pointing out that only a handful of the Chinese outfits on NASDAQ would meet the exchange's higher financial standards. The NYSE further notes that together the businesses boast a total market cap of just $18 billion, compared with $335 billion for the 16 mainland Chinese companies listed on the Big Board. That's because the NYSE mostly lists giant, state-controlled enterprises such as China Telecom (CHA ) and PetroChina (PTR ). The NYSE is pursuing "world-class companies that compete with other world-class companies," says Catherine R. Kinney, NYSE president. Nonetheless, it's worth noting that after the NYSE completes its merger with Chicago's Archipelago Exchange by early next year, it plans to create an all-electronic alternative for smaller companies -- like Hurray and Baidu.

By Joseph Weber in Chicago, with Brian Bremner in Hong Kong

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