Chinese tech companies have investors on the fence

By Joe Vladeck 

Investors are either excited or skeptical about Chinese tech companies. It depends who you ask, and when you pose the question. 

On November 1st, the New York Times' Dealbook reported that the return of Chinese companies to U.S. stock markets was "still in its early days" and posited that "the question now … is whether [several] recent debuts are an anomaly or have truly managed to unfreeze a market that was once a top destination for Chinese companies seeking to list overseas." Dealbook went on to explain that in 2010, "short-sellers and regulators started exposing what grew into a flurry of accounting scandals at Chinese companies with overseas listings," and concluded that "it is too early to say whether Chinese stocks are back in favor."

Just five days later, Dealbook answered its own question. In an article written under the headline "U.S. Investors Brush Aside Fears About Chinese Internet Companies," Dealbook reported that, "[f]or American investors, love of technology has conquered a fear of China." The latter article went on to explain that Americans buyers "are snapping up shares of Chinese Internet companies going public" in the Unites States, in "striking contrast with the recent past, when accounting scams and poor governance prompted many to shun Chinese stocks."

All the while, a new scandal was brewing: the stock of NQ Mobile, a Chinese telecom company, was in free-fall, owing to allegations of accounting fraud. NQ Mobile's U.S.-listed shares fell 62 percent, and Piper Jaffray, the lead manager of NQ Mobile's IPO, suspended the Chinese firm's favorable rating. Erik Lam, the director of Asian equity at global brokerage Auerbach Grayson & Co., summed up the market's sentiment: "That certainly doesn't sound positive."


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