Think “Globally” For Investing Opportunities

By: Tony_Sagami

Judging from the response, my last article on Asian IPOs caught a lot of people’s attention.

Of the top 15 performing IPOs this year, nine of them are foreign companies. Out of those nine foreign companies, one is from India: MakeMyTrip.com (MMYT). One is from the Cayman Islands: Fabrinet (FN). The rest are from China, such as SouFun Holdings (SFUN), China New Borun (BORN), and Country Style Cooking (CCSC).

While a lot of investors have made bundles on the wave of successful Asian (mainly Chinese) IPOs on the New York Stock Exchange and Nasdaq, an even bigger mountain of IPO money can be made on Asian stock exchanges.

The reason is that U.S. stock exchanges are losing out on many of the world’s best IPOs.

The Committee on Capital Markets Regulation, an independent research organization dedicated to enhancing the competitiveness of U.S. stock exchanges, says U.S. exchanges are becoming second-class locations for companies to list their stocks.

• In the first six months of 2010, a measly 2.7% of the world’s IPOs were sold in the United States. That’s right; only 2.7%, which means that 97.3% of IPOs were sold elsewhere. What’s more, that is down from the 28.7% that the U.S. averaged from 1996 to 2006.
• Of the 20 largest IPOs sold in the world this year, a big, fat ZERO were sold in the United States. Historically, the United States averaged five of the top 20 IPOs from 1996-2006.
• The total market value of all the stocks in the United States was 33.8%. That number was 43.3% in 1990.

U.S. Loss Is Asia’s Gain

The U.S.’s loss is someone else’s gain, and that has typically been Asian stock exchanges. The trend of companies deciding to go public in Asia is growing.

Sixty-one non-Taiwanese companies, including 43 mainland Chinese companies, have applied to sell their shares on the Taiwan Stock Exchange.

For the first time ever, a Russian company (United Rusal, HK:0486) and a French company (L’Occitane International, HK:0973) has gone public on the Hong Kong Stock Exchange. More than 80 foreign companies have applied to list their shares in Hong Kong over the coming months.

One of those 80 companies is Prada, the Italian luxury clothing chain. Prada plans to open 28 stores in China in the next year and expects its Asian sales to surpass its European sales within the next three years. China is already one of the largest luxury markets in the world, so Prada is hoping that investors will be as enamored with its stock as they are with its high-priced shoes, handbags, and clothes.

Russian oil giant Lukoil Holdings is also preparing to go public in Asia. Lukoil is trying to decide between selling its initial public offering on the Hong Kong Stock Exchange or Singapore Stock Exchange sometime in 2011. Lukoil, by the way, is the second largest oil company in Russia.

Those are just a couple of big name examples, but the river of IPOs is going to get even bigger. “Next year could be better than this year. I think the IPO market could reach about 500 billion yuan ($74.93 billion) next year.” said Jason Guo of Credit Suisse.

Investors Should Think “Globally”

My point is pretty simple: You better think ‘globally’ if you want to make some serious stock market profits.

I communicate with a lot of investors, and I am always surprised at how unwilling the majority of investors are to buy stocks on a non-U.S. stock exchange. For some reason, Americans seem to think that buying stocks in a foreign exchange is too difficult or too expensive.

IT’S NOT! Most U.S. brokerage firms have international trading desks and can process trades on most major foreign exchanges such as Toronto, London, Paris, or the four major Asian exchanges (Tokyo, Seoul, Hong Kong, and Singapore).

Get on the phone, call your brokerage firm, and ask them! The odds are VERY high that they have an international trading desk, which means that you have no excuse to limit yourself only to stocks that are listed on the NYSE, the American Stock Exchange, and the Nasdaq. Think globally!

The cost for an international trade is usually a little bit more. E-Trade, for example, charges around $23 for an international trade vs. $7.99 for a U.S. trade. That extra $16 is hardly an excuse to ignore the world’s hottest markets.

Even though it is EASY and CHEAP to invest in Asia, I know that a lot of investors won’t take off their parochial blinders. That’s a big mistake in my book, but at least keep up on the Asian companies that go public on the NYSE and Nasdaq.

Lastly, perhaps the best way to take advantage of this flood of IPOs about to hit the Hong Kong and Singapore stock markets is to invest in the stocks of the exchange itself.

Just like you can buy shares of the New York Stock Exchange by buying shares of NYSE Euronext (NYX), you can buy shares of the Hong Kong Stock Exchange and the Singapore Stock Exchange.

Both are available on their home exchange, but are also available on the U.S. over-the-counter market. The Hong Kong Exchanges & Clearing is HKXCF.PK and the Singapore Exchange Ltd is SPXCF.PK.

I’m not suggesting you rush out and buy them tomorrow. Both stocks have been on a roll, so your best option may be to wait until they go on sale.

But make no mistake. The best IPOs in the world are going someplace other than the United States, and that place is Asia.

Best wishes,

Tony

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