Pundits have been embroiled in analysis this quarter on why Chinese IPOs might be the next goldmine.
The weight of reason is resting on the premise that investors should not allow this wave to pass by without a slice of the pie.
Alibaba represents the best face of Chinese IPOs that have taken American and global markets by storm. When the Chinese ecommerce giant launched in the US in September 2014, it set a new record as the largest IPO to date.
Beyond Alibaba, the proven fact that China is churning out millionaires at a rate of 50% increase on year-on-year basis since 2015 is a green light.
The Optimism linked to Chinese IPOs
Chinese IPOs have an understandable basis that investors cannot overlook. The bulk of wealth created in China these days comes from technology and manufacturing combined, and these represent the next goldmine.
While real estate is the single largest contributor to the booming nouveaux rich class in China, wealth based on productive capacity is the major plank.
Anyone looking to profit from the booming industrial capacity in China should be on the lookout for the techies that are going public.
Waiting in the Wings
Since China has been a closed market for close to eternity, many investors look at companies originating from there with skepticism.
Alibaba broke the Chinese IPOs opaque threshold, and the rest is history.
Many investors wait to confirm the portfolio and background information of the companies coming to the market before committing their money.
In essence, by the time a public confirmation comes in for the companies, there is a mad rush for the stocks, which leads to a price spike.
A Peak at Some Chinese IPOs
In today’s open book world, it is easy to verify the metrics before taking a plunge in any direction. Companies like Qudian, Secoo Holdings, and Sogou, all have a cheery story to tell so far.
Qudian provides credit products on an online basis, and with the growing purchasing power of the Chinese, its business is booming.
Secoo Holdings provides shoppers a platform to shop on an online and offline basis, serving the Chinese market.
Sogou is the mobile search engine with the second largest coverage in China.
There is also cheery news from Bright Scholar Education and RYB Education. These companies are focused on giving Chinese students international bilingual education.
Performance Summary of Chinese IPOs
A couple of the Chinese IPOs have recorded commendable performance since their listing, and here is a summary:
- Bright Scholar Education +127^
- Alibaba +117%^
- RYB Education 43% ^
- China Rapid Finance +22%^
- Sogou +4.5^
- Best +2.5^
The Attraction to Chinese IPOs
Q4 to date has seen 11 Chinese IPOs and more are expected before the year closes. There is no doubt that with China emerging as the biggest mass market on earth, global investors cannot afford to watch as it opens up to the world.
While the volatility of Chinese stocks cannot be discounted, investment analysts will tell you that the greater risk of a portfolio, the higher the returns expected.