China funds hungry for autumn offerings

By Jeffrey Hodgson and Kennix Chim

HONG KONG (Reuters) - China-focused fund managers are hungry to invest in new stock offerings, suggesting a credit squeeze that has slammed global markets has done little to erode appetite for exposure to the fast-growing economy.

Managers with international fund houses told the Reuters China Century Summit they are particularly keen on buying into new consumer and commodity plays, as well as companies that can help China tackle environmental woes and its need for clean energy.

But they also hope the global flight from risk forces issuers to price deals more attractively.

"Because people are operating under risk-aversion scenarios, we fully expect our investment banking counterparts will be cooperative at pricing these offerings at attractive discount levels since we are there, and others may not be," said Howard Wang, head of the Greater China team at JF Asset Management.

"I'd characterize us as having a high appetite to buy new offerings," added Wang, who is lead manager of the $744.6 million JF Greater China fund.

JF Asset, the Asia fund arm of JPMorgan Chase & Co, invests more than $25 billion in Greater China markets.

"For us, it's not quite, but it's closer to, business as usual, I think, than the market would have it. In other words, we're operating not under a strong risk-aversion scenario. We're operating under our generally cautiously optimistic view," he said.

LAUNCHES DEFERRED

Hong Kong has been the world's second-largest IPO market, after London but ahead of New York, since the start of 2006, with deals worth almost $60 billion, according to data provider Dealogic.

But planned offerings by mainland Chinese firms in overseas markets such as Hong Kong were hit last month when concerns about the collapse of the U.S. subprime mortgage market caused global stock markets to tumble from record highs set in July.

Firms that had been approved to list in Hong Kong in August but pushed back the launch of marketing to September included software and online gaming firm Kingsoft Corp and Qunxing Paper Holdings, whose products are used for interior decoration and furniture making.

While August is normally a slow month, the value of these overseas IPOs by mainland Chinese firms fell to $469.9 million last month, the lowest since January, from $2.6 billion in July and a year-to-date peak of almost $8.2 billion in April, according to Thomson Financial.

But fund managers said investment banks such as UBS, Goldman Sachs and Morgan Stanley have a healthy IPO backlog which they should begin bringing to the market soon.

"We are in the middle of this consolidation. So when the consolidation is complete ... is really the trigger for the flood of new IPOs starting from October," said Yang Liu, chairwoman of Atlantis Investment Management's Hong Kong unit, who manages $4 billion in Chinese assets for Atlantis.

"I'm very excited about the new IPOs. There are some very good companies that postponed because of the current correction."  Continued...