Monday 15 August 2011

Chinese IPOs come back into favour

Chinese companies have often been criticised for their turbulent relationship with UK investors. On AIM in particular they are often accused of not being transparent enough, and it is well documented that investors have had their fingers burnt by some high profile companies.

However, it seems that there is a flip side to this, and one that intuitive Chinese companies can capitalise on. Whilst the preconception is that these types of companies are prone to shying away from regular communication with investors, many fund managers still want exposure to the significant opportunities and vast markets that are present in China across a variety of sectors. There is a great opportunity, therefore, for companies that are prepared to be transparent and communicate openly to make a great success of their time on AIM.

Dongfang Shipbuilding, which joins AIM this week, is intending to leverage the market’s standing and corporate governance guidelines. By listing on AIM, Dongfang’s management intends to promote the Company as transparent and adhering to high levels of corporate governance, which will not only be reassuring to investors, but also help the Company to stand out amongst its peers in the Chinese shipbuilding industry. The Board believes that the European ship owners in particular will feel that the Company’s listed status in London will make it stand out in a crowded market and give a level of reassurance that isn’t possible as a private company.

With AIM listed companies such as China Food Company and Sorbic International putting considerable emphasis on transparency and behaving like Western-run companies but with the direct exposure to the growth in Asian markets, investors may finally be prepared to consider Chinese companies again as a good opportunity. Dongfang’s IPO this week reiterates that there is investor demand for Chinese companies that are well run and willing to play by the rules; and, in turn, they will be rewarded with their new found status as a listed company and the support of UK shareholders.

Henry Harrison-Topham

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