Taking first weekend off, after one month. Had a real cup of coffee. Relaxing.
BRIC IPOs Show Region’s ‘Growing Power,’ Biggs Says (Update2)
Share | Email | Print | A A A
By Allen Wan and Catarina Saraiva
July 24 (Bloomberg) -- The world’s two biggest initial public offerings this year are from China and Brazil, reflecting the “growing power” of the so-called BRIC nations, said Barton Biggs, who runs New York-based hedge fund Traxis Partners LP.
China State Construction Engineering Corp., the nation’s largest housing contractor, yesterday raised 16 billion yuan ($7.3 billion) in Shanghai in the largest IPO in 16 months. The Brazilian affiliate of Visa Inc., known as VisaNet, took in 8.4 billion reais ($4.3 billion) in its Sao Paulo offering in June.
“No question, it shows the growing power of the BRICs,” Barton Biggs, the former chief global strategist for Morgan Stanley, said in a telephone interview from New York. “Clearly the BRICs are the big growth areas of the world and will need a lot of foreign capital.”
The BRIC nations, which also include India and Russia, have the four best performing stock markets in dollar terms this year among the world’s 20 biggest, according to data compiled by Bloomberg.
China’s Shanghai Composite Index has soared 85 percent in dollars while Brazil’s Bovespa Index rose 77 percent. India’s Sensitive Index, or Sensex, climbed 61 percent and Russia’s RTS Index gained 60 percent. The Standard & Poor’s 500 Index in the U.S., by comparison, is up 8.4 percent while Japan’s Nikkei 225 Stock Average rose 7.5 percent.
‘Tremendous Interest’
Investor appetite for emerging-market assets is building on speculation that countries such as China and Brazil will be among the first to recover from the worst global recession since World War II, said Vinicius Silva, New York-based emerging markets strategist for Morgan Stanley.
“It highlights the fact that demand for emerging-market assets remain strong and that companies, particularly in the BRIC markets, are using the improvements in capital markets to raise capital,” Silva said.
Bids for State Construction’s IPO, the fifth since China ended a nine-month moratorium on sales in June, totaled 1.85 trillion yuan ($271 billion). China’s economy, the world’s third largest, grew 7.9 percent in the second quarter, fueled by the government’s 4 trillion yuan stimulus plan, after expanding 6.1 percent in the January-to-March period.
“The tremendous interest in recent Chinese IPOs reflects investor confidence in China’s economy rebound,” said Jing Ulrich, Hong Kong-based chairwoman of China equities for JPMorgan Chase & Co. She said she expects China to likely be the world’s “top issuer” of IPOs this year.
VisaNet Rallies
In India, the best year for stocks since 2003 is also reviving the IPO market. Indian billionaire Gautam Adani’s power company, Adani Power Ltd., plans to raise as much as 33.2 billion rupees ($681 million) in the nation’s biggest initial share sale in 18 months.
“Over the long cycle I absolutely think you’re going to see more IPOs from China, Brazil and other such countries,” said Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida. “They have the growth.”
Developing economies will expand 1.2 percent this year and 4.4 percent in 2010 while economies in “high-income” countries will contract 4.2 percent this year and grow 1.3 percent next year, the World Bank forecast in a June report.
VisaNet has rallied 17 percent since its June IPO, tripling the broader Brazilian market’s gains, as investors piled into the shares amid prospects of credit card growth in Latin America’s biggest economy.
Brazil IPO in U.S.
Brazil’s central bank cut its key interest rate by a half percentage point to a record 8.75 percent on July 22, the fifth reduction this year, in an effort to bolster consumer spending and spur growth.
The largest IPO in the U.S. this year could be by another Brazilian company, JBS SA. It announced plans on July 22 for a $2 billion share sale of its U.S. beef unit. The biggest U.S. IPO this year was by Mead Johnson Nutrition Co., which raised $828 million in February.
Biggs said he expects the U.S. IPO market to pick up as the world’s largest economy starts to recover.
“Do I think the U.S. IPO market is dead -- no,” he said.
To contact the reporters on this story: Allen Wan in New York at awan3@bloomberg.net; Catarina Saraiva in New York at Asaraiva5@bloomberg.net |
