Private equity eyes China listings

By Alison Tudor and Brian Kelleher

HONG KONG (Reuters) - The rise of China's domestic stock market has created a new venue for private equity firms to sell out of their assets, helping to ease historical concerns about the ability to exit mainland investments.

High valuations on the Shanghai and Shenzhen stock markets, the appreciating yuan currency and an increasingly onerous path to overseas listings have made onshore listings attractive propositions for private equity.

"Options for exiting China are better than they were," Ralph Parks, chairman of U.S. alternative investment firm Oaktree Capital, told the Reuters Hedge Funds and Private Equity Summit in Hong Kong.

"I think they will become better over time. Since our investment horizon is not three to six months, it is fine to let those events play out," he added.

After being one of the world's worst-performing stock markets for the previous four years, mainland shares soared 130 percent in 2006 and Shanghai has become a busy IPO venue.

The price/earnings multiple of China's Shanghai Composite Index .SSEC clocks in at 28.9 times, nearly double the 14.7 times multiple on Hong Kong's benchmark Hang Seng Index .HSI, according to Reuters data.

Beijing is also actively encouraging Chinese companies to list onshore, helping to develop its capital markets and give local investors more options after top companies chose for years to go public in Hong Kong or New York.

"We look forward to the day we can list one of our assets on the Shanghai stock exchange," said Chris Rowlands, managing partner of Asia for private equity firm 3i Group (III.L: Quote, Profile, Research, Stock Buzz). "We want 3i to participate in the development of that market."  Continued...