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As the trade war persists between China and Trump’s administration, Investor Sam Le Cornu said China would make good money via the IPO market.
Amid tensions between Washington and Beijing, the CEO of Stonehorn Global Partners, Sam Le Cornu said a “huge amount of money” will be returning to China through the IPO space. Some companies primarily listed in the U.S. are already on the Hong Kong stock exchange (HKG) through secondary listings. Examples are Alibaba Group Holding Ltd (HKG: 9988), JD.com (HKG: 9618), and NetEase Inc (HKG: 9999). Le Cornu is confident that “a lot more” companies will follow the footsteps of these firms.
China to Generate Money through IPO
As major firms return to China, Le Cornu said the companies would generate money for the country through their IPOs. Speaking to CNBC’s “Squawk Box Asia” on Monday, the co-founder of Stonehorn Global Partners said:
“There’s a huge amount of money coming back home [China] in terms of the IPO space.”
Earlier this month, the Trump administration considered adding Semiconductor Manufacturing International Corporation (SMIC) (HKG: 0981) to the Commerce Department’s entity list. A CNBC report revealed that the Department of Defense is deliberating on the move. Already, the U.S. entity list, which restricts companies from receiving goods from the US, contains more than 300 China-based firms. Following reports on the administration’s consideration, shares of SMIC fell over 20% on Monday.
In reaction to the news, SMIC said that the company hopes to resolve the potential misunderstanding with the Trump administration. In addition, the company is open to transparent communication with the U.S.
As for the CEO of Stonehorn Global Partners, the development is a golden opportunity for the Hong Kong stock exchange. Referring to the China International Capital Corporation, which plays the role of an underwriter in IPOs, Le Cornu said brokers would also benefit from the companies’ return:
“There’s money to be made when looking as this activity”
Considering recent losses caused by the pandemic, the investor is confident that there will be an economic increase in China in Q2 2020.
Recent IPOs in China
On the 8th of September, Nongfu Spring (HKG 9633) bottled water went public in China, raising $1.1 billion. Priced at 21.50 Hong Kong dollars, Nongfu climbed 85% in early trading and sold over 388 million shares. The stock opened at 39.80 Hong Kong dollars per share ($5.14) and closed at 33.1 Hong Kong dollars. Some of the lead investors include GIC Pte Ltd, hedge-fund manager Coatue Management LLC, and Fidelity Investments Inc.
Subsequently, the founder of the Chinese bottled water group became the country’s second-richest person. Currently, founder Zhong Shanshan who also owns 84% – the largest share of the company – is now worth $52.1 billion. This is about $5 billion lower than China’s richest man Pony Ma, founder of the Chinese internet group Tencent.
Recently, analysts are beginning to believe that the Chinese stock market has a lot of opportunities to offer. According to analyst Fraser Howie, investors are now moving towards stock since global interest rates remain low.
Regardless of the trade war between China and the U.S., Chinese companies are not discouraged from listing on the American stock exchange. In July, Chinese electric vehicle company (EV), Li Auto, raised $1.1 billion in its IPO on the Nasdaq.