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Chinese IPOs catching fire

Posted by: Aaron Pressman on October 30, 2006

Looking down a list of recent IPOs, one number jumped off the screen: 84%. That’s the market return of Home Inns & Hotel Management (Symbol: HMIN) since it went public four days ago. A more amazing (or perhaps alarming, depending on your point of view) fact is that the Chinese hotel chain only filed its registration statement at the Securities and Exchange Commission on October 4. Three weeks later, it’s one of the hottest IPOs of the year. The chain, operating 82 hotels across China, had revenues of $109 million and net income of $8 million last year.

There’s plenty of investor excitement about China, thanks in part to hype around last week’s mega $19 billion IPO of Industrial & Commercial Bank of China (which didn’t include a U.S. listing, by the way). Other recent movers include New Oriental Education & Technology Group (EDU), up 60 plus percent since going public September 7, and Mindray Medical International (MR), up about 40% since September 26.

Fundamentally, though, there’s a simpler explanation. Even with the recent U.S. market surge, Chinese stocks as measured by Morgan Stanley Capital International’s “China A” index have far outperformed, gaining 62% so far in 2006. In a world of lackluster returns, that’s pretty enticing. It also suggests ordinary investors would be smarter avoiding single issues and buying an index fund like the iShares FTSE/Xinhua 25 Index (FXI).

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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