By Michael Tsang Nov. 30 (Bloomberg) — Initial public offerings in emerging nations are returning about 15 times more than IPOs in developed countries even as companies from China to Brazil flood the market with more shares than ever. Listings by Longfor Properties Co. , Banco Santander (Brasil) SA and Kuala Lumpur-based Maxis Bhd. helped raise $39 billion in emerging markets during the three months ending today, data compiled by Bloomberg show. That outstrips the amount sold in IPOs from 23 industrialized nations by $21.3 billion, the biggest gap since at least 2000, the data show. Offerings by Chinese property companies, banks in Brazil and Malaysian mobile-phone providers have enticed investors as the MSCI Emerging Markets Index almost doubled from its 2009 low and economic growth outpaces the U.S., Europe and Japan. While IPOs in developing markets rose 21 percent and offerings in mainland China rallied 88 percent in the past three months, the “avalanche” of sales may help spur a 20 percent drop in share prices, according to Mark Mobius . “Investors are a lot more confident about emerging markets than they are in developed markets,” said Shane Oliver , head of investment strategy at Sydney-based AMP Capital Investors, which oversees about $89 billion globally. “Investors realize that the growth potential is in the emerging world.” China Minsheng AMP bought Evergrande Real Estate Group Ltd., a Guangzhou- based real-estate developer, its initial Hong Kong share sale on Oct. 29, and China Minsheng Banking Corp., the nation’s first privately owned lender, when it offered stock this month in the largest public sale of equity in Hong Kong since April 2007. Minsheng, which already traded in Shanghai, had the worst Hong Kong debut among the seven Chinese lenders that sold shares in the territory since June 2005, dropping 3.1 percent on Nov. 26. The Beijing-based bank’s retreat came nine days after Shenzhen-based brokerage China Merchants Securities Co. posted the smallest first-day gain among companies listing on exchanges in mainland China this year. Thirty-seven companies from the nations in the MSCI Emerging Markets Index have sold shares in public offerings this month, bringing the numbers of IPOs since September to 149, according to data compiled by Bloomberg. The sales have been propelled by a 98 percent rally in MSCI’s gauge of developing countries since March 2. ‘In the Pipeline’ The surge in offerings will put “downward pressure” on prices, according to Mobius, who oversees about $25 billion of developing-nation assets at Templeton Asset Management Ltd. The MSCI Emerging Markets Index slid 2.5 percent last week, the first decline in a month, as Dubai’s attempt to delay debt repayment unnerved investors. “I’ve been cautious because I’ve felt that there would be a significant correction,” Mobius said from Hanoi in a Bloomberg Television interview on Nov. 27. “With these IPOs in the pipeline, that will tend to suppress the emerging markets.” Sands China Ltd., the Macau casino operator that raised HK$19.4 billion ($2.5 billion) in the world’s second-largest IPO of November, will start trading in Hong Kong today. The unit of Las Vegas Sands Corp. controlled by billionaire Sheldon Adelson sold 1.87 billion shares at HK$10.38 each on Nov. 21 after seeking as much as HK$13.88, a price that would have given Sands China a higher valuation than any casino resort in the world, data compiled by Bloomberg show. Hochtief, Great Depression No U.S. IPOs are scheduled until Dec. 9, as the pace of offerings slows after the Thanksgiving holiday, according to Bloomberg data. Essen, Germany-based Hochtief AG , the country’s biggest construction company, will sell shares in Hochtief Concessions AG , its unit that manages airports and roads, to raise as much as 1 billion euros ($1.5 billion) this week. Companies in developing nations have grown more successful in attracting money since March, when equity markets bottomed after the worst financial crisis since the Great Depression. IPOs in emerging markets raised $677 million more than those from industrialized countries in the three months ended in April, data compiled by Bloomberg show. That advantage has now widened to $21.3 billion in the September-to-November period. Santander Brasil , the Sao Paulo-based unit of Banco Santander SA in Santander, Spain, held Brazil’s biggest IPO ever last month. Metallurgical Corporation of China Ltd., the company that helped build the “Bird’s Nest” Olympic stadium in Beijing, raised a combined $5.1 billion offering shares listed in Hong Kong and Shanghai in September. Verisk Analytics In developed countries, 53 IPOs sold $17.7 billion in stock since September, the data showed. The largest U.S. offering came from Verisk Analytics Inc., the Jersey City, New Jersey-based supplier of actuarial data to insurers that raised $2.16 billion last month. Companies in emerging nations are offering more shares as economists project that growth will outpace the U.S. by as much as three times. China’s gross domestic product will expand 9.5 percent next year and Brazil’s will rise 3.8 percent, estimates compiled by Bloomberg show. That compares with 2.6 percent in America and 1.2 percent for the euro zone and Japan. “Emerging markets are where everyone wants to have their money,” said John Ditierri , who helps oversee $11 billion in equities at Arlington, Virginia-based Emerging Markets Management. “If you go through the list of investment options, you want to have a higher allocation than you did before.” 21 Percent Buyers of IPOs from emerging markets have also been rewarded with bigger gains. Since September, companies with initial offerings have climbed a median 21 percent in the first month of trading, data compiled by Bloomberg show. That compares with a 1.4 percent advance by IPOs in developed nations. The 18 U.S. companies that sold shares in September and October underperformed the Standard & Poor’s 500 Index by 0.8 percentage point, the worst performance since at least 1995, data compiled by Bloomberg show. Longfor Properties , the biggest developer in the southwestern Chinese city of Chongqing, advanced 13 percent in its first day of trading on Nov. 19 after its IPO. Maxis , Malaysia’s largest mobile-phone operator, climbed 8.4 percent the same day after the company raised 11.2 billion ringgit ($3.3 billion) in the world’s biggest offering of November. Share gains in emerging markets have been concentrated among companies from China, the only economy among the world’s 10 largest that’s projected to expand this year. Mainland IPOs, which most overseas investors aren’t allowed to buy, accounted for more than a third of emerging-market offerings in the past three months and posted a median gain of 88 percent in the first month of trading, Bloomberg data show. Santander Brasil Brazil and India, which together accounted for 14 IPOs that traded since September, left buyers with a median loss of 5.3 percent, the data show. Nine slumped below their offer price. Santander Brasil has slid 2.4 percent since selling 525 million units at 23.50 reais each on Oct. 6. Brazil’s benchmark Bovespa Index has climbed 7 percent in the same period. “You need to be very careful about making assumptions that the rising tide will lift all boats in emerging economies,” said Peter Sorrentino , who helps manage $13.8 billion at Huntington Asset in Cincinnati. “I’d be very cautious about chasing any of those emerging markets right now.” The surge in listings may be adding to a “bubble” in valuations for developing markets, Sorrentino said. The MSCI Emerging Markets Index traded at 21.9 times the earnings of its 752 companies this month, the most expensive level since 2000, data compiled by Bloomberg show. Brazil, India While some companies selling shares in Brazil and India dropped, the performance of U.S. IPOs has rebounded in November. The nine companies that completed offerings beat the S&P 500 by 11.9 percentage points on average, Bloomberg data show. Dollar General Corp., the Goodlettsville, Tennessee-based discount retailer controlled by KKR & Co. in New York, advanced 10 percent after its IPO raised $824 million. Fortinet Inc., the maker of all-in-one network-security equipment, jumped 35 percent after the Sunnyvale, California-based company became the first Silicon Valley startup to go public in almost two years. The gains don’t account for four planned offerings that were shelved in the past four weeks after underwriters weren’t able to convince enough investors to pay what the companies wanted. HealthPort Inc., the Alpharetta, Georgia-based developer of software used to manage medical records electronically, was the latest American company to postpone its sale on Nov. 19. Cloud Peak Energy Inc., the third-largest U.S. coal producer, cut the price for its $459 million IPO the same day as investors refused to pay the $16 to $18 a share sought by the unit of Rio Tinto Group in London. The shares have slipped 5.2 percent since Gillette, Wyoming-based Cloud Peak’s offering. “The whole EM story space is just so much hotter than the U.S.,” said Uri Landesman , New York-based fund manager at ING Investment Management. “You’re never going to have a perfect bucket of apples even in the best of times, and these are not the best of times,” he said. “Emerging markets are still a good place to be.” To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net .
