China IPOs: A Profitable Investment
Trend
The Dynamic Wealth Report
January 4, 2011
by Justin Bennett, Editor
By now I’m sure you’ve heard of all the
myriad opportunities in Chinese stocks…
Not long ago, Chinese stocks were practically unstoppable. You could
just throw a dart at a list of Chinese stocks and pick a huge winner. Nearly ever stock with the name “China” in it went to the moon.
But today’s Chinese markets require a bit more expertise. The country is
growing so fast it has many investors worried the economy is
overheating. And these worries are scaring away some investors.
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But I think these worries are being overstated…
China is still one of the best growth stories out there. The country is
working to manage its growth and keep a rein on inflation. And if you
know what to look for, Chinese stocks hold immense potential to generate
wealth.
After all, the country’s economy is still growing at a near 10% clip. And with nearly
1.3 billion people, China is quickly becoming one of the
largest consumer marketplaces in the world.
Clearly, their markets remain filled with opportunity for business and
investors alike.
One of my favorite ways to play the Chinese growth story is through
IPOs…
As you may know, an IPO (Initial Public Offering) is when a private
company goes public. By going public, investment bankers raise money for
the company so they can expand their business.
Many up-and-coming Chinese companies are listing on American exchanges. By listing on the NYSE, AMEX, or Nasdaq, Chinese companies increase
public exposure and attract much needed investment capital.
Also, by listing on these US exchanges, Chinese companies must comply
with many US reporting standards. By accepting these standards,
Chinese companies lower their borrowing costs because of better
transparency.
So the whole IPO process is great for Chinese companies.
But it’s also great for American investors.
By listing on US exchanges, the full potential of the Chinese economy
is open to investors like you and me.
And judging by recent performance, US investors love the China story…
Chinese IPOs outperformed the US broad markets by a wide margin in
2010. In fact, according to CNBC, China IPOs were up an average of 36%
last year. Compare that to a 10% gain in the S&P 500 and you see why
investors have their eyes peeled for the next hot China IPO.
The reason for the outperformance is simple…
The China growth story is going strong. Investors want to get their
hands on what could be the next big business opportunity in China.
But you shouldn’t just rush out to buy Chinese IPOs willy-nilly…
You need to take some important steps so you don’t end up with oversized
losses instead of oversized gains.
Be sure to read the 424(b)(4) on each Chinese IPO you’re thinking of
putting your hard earned money in. This SEC required document will give
you the low-down on the company and what their plans are.
After a company is public, take a look at their stock chart and pay
close attention to the price action. Some IPOs take off and never look
back after the first day of trading. But others surge during the first
couple of days of trading, only to sell-off just as fast in following
days.
These quick pullbacks shake a lot of investors out with big losses. But
once the shakeout is done, the stock can turn around and push higher.
Due to this price uncertainty, make sure you don’t “load the boat” on
any one IPO. And pick your entry point carefully.
With all the growth China is experiencing, the IPO market for these
stocks is likely to stay hot for some time. Be sure to take
advantage of it!
***Editor's Note*** Speaking of China, we're just
2 days away from the launch of our new investment newsletter, China
Stock Insider. As you're probably aware, Chinese stocks and
IPOs look like THE place to be for 2011 and beyond! So we decided
to launch this new service to help you find the best opportunities for
explosive growth.
Click here
to get the details on this exciting new service!
It’s been a quiet week in the IPO market due to the year-end holiday
season. But one recent IPO is performing well after opening for trading
on December 15th. RigNet (RNET) is now trading above
$14, a 16% gain from its $12 IPO price.
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