Foreign venture capital institutions keep hopes up
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Xinhua, October 31, 2011
Although China concept stocks in the U.S. stock market have presented sluggish performance recently, most foreign venture capital institutions in China are still showing confidence in the investment opportunities in the country's huge market.
China concept stocks have experienced a drastic downward adjustment over the past several months amid sharp retreat on the US stock market and uncertainties in global economic prospects. Most planned initial public offerings by Chinese companies have been halted. Since the beginning of the third quarter, only one Chinese firm -- Tudou Holdings Ltd., China's second-largest online video service, launched IPO in the U.S. stock market.
Drew Bernstein, co-managing partner of Marcum Bernstein and Pinchuk (Marcum BP), a PCAOB (Public Company Accounting Oversight Board)- registered accounting firm headquartered in New York, said it was hard to say when China's concept stocks will rebound, indicating that U.S. investors still had some concerns about the credibility of Chinese enterprises.
Some Chinese companies listed on U.S. stock exchanges have faced frequent accusations of accounting fraud in recent years. Although the U.S. has not raised its threshold for listing criteria, the PCAOB has warned its auditors to watch out for companies from emerging countries like China.
More and more foreign venture capital institutions have begun to show an unprecedented aspiration for yuan-based funds. With the lure of great investment potential, these investors have chosen to adjust their investment strategies in China, including spreading to the nascent market for yuan funds, rather than closing their doors to Chinese firms.
Kang Ruoxi, Asia-Pacific CEO of ICAN Capital, a foreign venture capital institution, said that after pouring 1 billion yuan (158.7 million U.S. dollars) into the Chinese market this year, the company has planned to pay more attention to yuan fund investment.
Another foreign venture capital institution, GGV Capital, has expanded its yuan fund scale from 300 million yuan to 1 billion yuan, said Zhuo Fumin, a partner with the company.
"There are plenty of investment opportunities in China, as the country is undergoing a major financial transformation," said Zhuo.
ICAN Capital has shown interest in the mining, green energy and health sectors in particular, Kang said.
"We are going to launch two more investment projects focusing on mining and consumption," said Kang. "Since the Chinese green energy market has promising prospects, our company will consider increasing investment in the area," she said.
Venture capital institutions are likely to invest money under poor market conditions so that they can make more profits when the market improves, said Tu Hongchuan, managing director of Highland Capital.
The rising financing needs of enterprises amid global economic uncertainties and the decline of investment costs in the Chinese market have created tremendous investment opportunities for foreign venture capital institutions, Tu said.
Crocker Coulson, president of CCG Investor Relations and Strategic Communications, said that the gloomy global economy is partially to blame for the decline of China concept stocks.
Observers believe that as long as related economic indicators see positive performance during several consecutive weeks, will the pipeline for Chinese companies preparing for IPOs in the U.S. become stronger.
"At least 50 companies are prepping for U.S. IPOs and about a dozen or so have already started the U.S. Securities and Exchange Commission (SEC) registration process," he said.
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