Tainted by compatriots' scandals, Chinese firms may struggle to float in Europe

Fri Sep 26, 2014 2:58am EDT
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By Jakub Iglewski

WARSAW (Reuters) - With Frankfurt likely out of bounds for Chinese company flotations after a series of corporate problems, their advisers would be forgiven for seeking alternative capital-raising venues around Europe. They will probably find it tough going.

Last week's announcement by Frankfurt-listed Chinese shoemaker Ultrasonic US5.DE that its CEO had vanished along with about $60 million, may have heightened the sense of risk in buying shares in Chinese companies, even if they carry the seal of approval of being listed on a prestigious European bourse.

Such concerns will not be confined to Germany and are already evidenced in Warsaw for instance, whose bourse has hosted two Chinese listings in the past year only to see both subsequently lose value.

Marek Buczak, head of foreign markets at Warsaw-based mutual fund Quercus TFI, said the experience of Ultrasonic and some other Chinese stocks listed in Frankfurt could be a warning to Polish investors. "Chinese firms may find it difficult to gain capital in Warsaw," he told Reuters.

The fact that Ultrasonic CEO Wu Qingyong re-surfaced on Sunday saying he had simply been on holiday and had lost his mobile phone may not be enough to restore confidence in Chinese listings as a whole, even as U.S. investors lap up shares in tech leader Alibaba Group Holding (BABA.N: Quote).

Shares in both Chinese companies listed in Poland, Peixin International Group NV PEX.WA and JJ Auto JJO.WA, are trading well below their debut levels.

Peixin shares have lost around a third of their launch price last October, while Warsaw's WIG index WIG. has climbed 11 percent over the same period. JJ Auto has lost about a quarter of its value, making it the worst debutant on the Warsaw bourse this year.

There are other negative precedents in Frankfurt that European investors will be aware of.   Continued...

Traders work at their desks in front of the German share price index DAX board and a banner reading "Deutsche Boerse Welcomes Ultrasonic" at the Frankfurt stock exchange December 9, 2011.    REUTERS/Remote/Kirill Iordansky