Chinese Companies “In Season” Foreign Asset Purchases

(Stock Investment) The listed companies in China is entering a “shopping season” the largest foreign assets so far, the advantage of the superiority of the domestic stocks are priced much higher than with foreign assets.

China public acquisition

With $ 26.5 billion, the companies listed in Shanghai and Shenzhen have marked a record acquisition of foreign assets in 2015

In the last week, Haier Group Corp., the multinational corporation specializing in consumer electronics devices and appliances, is headquartered in Shandong, China announced it would buy back appliances segment of General Electric Co. for $ 5.4 billion. This is considered the largest acquisition of a Chinese electronics company overseas. Transaction expected to be completed in mid-2016.

With deals on Haier’s cult, the deal values the purchase of foreign assets of the listed companies in China has climbed to $ 8.6 billion since the beginning of 2016 until now. The Chinese stock market fell into a bear market (bear market) has not slowed the volume and the number of acquisitions of foreign assets, the value of the deal to the current 1/3 record levels in 2015, according to data compiled by Bloomberg.

The stock is overvalued created space for Chinese companies to enhance the value and buy more profitable assets abroad. Chinese companies being valued at 3 times higher inland than in the US market.The number of listed companies to expand trading activities, acquisition of foreign assets growing, can help the country recorded another year “at the market” vibrant.

“Shares of Chinese companies traded at much higher prices, but often less profitable. They arrived in time to benefit from the high price fixed by buying something suitable. In fact, these companies are acting as a financial investor, “Samson Lo, head of mergers and acquisitions in Asia at UBS Group.

The companies listed in Shanghai and Shenzhen spent a total of $ 25.6 billion to acquire foreign assets and investments in 2015, up 48% compared to 2014, according to data compiled by Bloomberg. Not only the “playboy” big, smaller companies are also pursuing “movement” this shopping and often use their shares to carry out trading activities.

BTG Hotels, listed on the Shanghai Futures Exchange last month announced a deal valued at $ 1.8 billion acquisition of Homeinns system inn Hotel Group. BTG Hotels gained backing from the Beijing municipal government and is now awaiting approval from the Chinese government for the proposal is supported by 3.9 billion Yuan (593 million dollars) for the deal .

Including debt, the shares of Homeinns are P / E of 22.6 times, while the P / E of the stock BTG Hotels is 45.4 times, according to data compiled by Bloomberg. After the publication of information on the date 24/12/2015, BTG shares rose more than 75% Hotels in the next 6 trading sessions.

Shares in China’s domestic market is trading at 54.2 times average earnings than many 3x in the US and more than 5 times in Hong Kong, according to data compiled by Bloomberg.

Besides, shares of Chinese companies often increased sharply after the information acquisition of foreign assets. Such as Shandong Delisi Food stocks, frozen meat manufacturer in east China, has increased “ceiling” of 10% for 5 consecutive trading days after the 2 information purchase property in October and November / 2015.

“It seems that the Chinese listed companies are shopping around the globe and finding good fortune to implement the agreement.This is similar to the Japanese company has ever made in the 1980s, when Japan’s economy received a booster from industrialization and the strong yen, “Ken Chen, strategist at KGI Securities Co. said.

One of the other reasons why Chinese companies prefer to buy property abroad, which is the real estate market of domestic securities and are often more volatile, making investors become more conservative. While the Chinese government to encourage investment group externally to support the conversion of RMB into foreign currency, Chen said.