China’s stock sales in the United States are rising despite the threat of withdrawal

Funds raised by Chinese groups in U.S. equities markets rose 440% in the first months of 2021, as the attractiveness of Wall Street valuations outweighed the threat of forced withdrawals.

Chinese companies have hit a record $ 11 billion this year on the New York Stock Exchange and the Nasdaq through initial public offerings, follow-up stock sales and the issuance of convertible bonds, according to Dealogic data.

Major lists include a $ 1.4 billion IPO by the e-cigarette maker RLX technology and a $ 947 million offer from software company Tuya, along with those from 20 other Chinese groups.

The large number of agreements highlighted the attractiveness of large US capital markets for Chinese companies despite the tensions between Washington and Beijing.

The NYSE this year three retired Chinese state-owned telecommunications companies on their alleged ties to the country’s military. More could face the same fate after U.S. lawmakers passed a law in December that will forcibly withdraw groups who refuse to undergo U.S. audit inspections for three years, which Beijing has banned.

But bankers and lawyers for the public investment exchange said a quote in the U.S. still offered Chinese groups access to a deeper market and more coverage by equity analysts, even as they have. had the stock exchanges of Hong Kong and mainland China. he was trying to close the gap.

“Implementation [of the delistings law] it’s still a way out, ”said Jason Elder, a partner at the Mayer Brown law firm in Hong Kong. “Most companies wouldn’t want to sacrifice a few years of growth while waiting for it to shake up, especially with the market-building environment we have right now in the US.”

The list boom also reflected China’s strong economic recovery after the Covid-19 pandemic.

Last week, China reported record year-on-year GDP growth of more than 18% during the first quarter, illustrating how Beijing’s decision to impose strict blockades a year ago helped the country chart a path out of the pandemic long before its global counterparts.

“The Chinese economy is expected to grow strongly in 2021. In addition, with the emergence of a very strong group of companies and of course you have investors who want to find ways to invest in these names,” he said. say Craig Coben, co-director of global capital markets in Asia-Pacific for Bank of America.

While the shares are listed in Shanghai and Shenzhen han plateau after surpassing global performance in 2020, the U.S. market has advanced this year, with a benchmark S&P 500 rising 10%.

The US market has also benefited stronger ratings, with a price-earnings ratio of the S&P 500 that stood at 32 times, compared to 19 times for the CIS 300 in mainland China. The Nasdaq Golden Dragon index of Chinese companies listed in the United States traded at an attractive PE ratio of about 100 times.

This has helped increase stock market valuations and provide a receptive environment for the sale of shares of already listed Chinese companies.

“Investors are focusing on growth margins and the prospect of profitability here and now,” Coben said, “and will address regulatory changes or geopolitical events as they materialize.”