China's Cooking, in New York

09/30/2010 12:05 pm EST

Focus: GLOBAL

Igor Greenwald

Chief Investment Strategist, MLP Profits

Irish credit default swaps hit a record high this week, but the Celtic banking crisis was clearly on Wall Street’s back burner.

Divided Portugal is looking more and more like the next Greece, but that news too tasted like stale leftovers.

To see what really gets the market’s juices flowing these days, belly up to Country Style Cooking (Nasdaq: CCSC), a nascent fast-food chain with 101 eateries and $7.9 million in tangible book value as of June.

Country Style Cooking has the good fortune to be expanding from Chongqing, China, rather than, say, from Chattanooga, Tenn. Partly as a result, it was able to raise $82.5 million in its New York initial public offering and to reach $125 million in market capitalization after two trading sessions.

Yet Country Style’s 47% opening-day gain wasn’t the best showing by a Chinese newcomer in New York this month. Real estate Web site SouFun (Nasdaq: SFUN) jumped 73% in its debut two weeks ago. The single biggest first-day bang for a US IPO in almost three years came in August, when India’s MakeMyTrip (Nasdaq: MMYT) levitated 89%.

By the time Ching Ming Yang Wind Power (NYSE: MY) and China Cache (Nasdaq: CCIH) go public this week, September will have seen more Chinese IPOs than American ones in New York. Recent Chinese listings have been among the market’s best performers. Jinko Solar (NYSE: JKS) has nearly tripled in price since its May IPO. HiSoft Tech (Nasdaq: HSFT) gained 145% since pricing below the expected range at the end of June. AutoNavi (Nasdaq: AMAP) and Camelot Information Systems (NYSE: CIS) came out in July, and are up 31% and 63%, respectively.

New York, of course, has become an afterthought on the global IPO scene. The $19 billion raised there this year is dwarfed by the estimated $74 billion haul from first-time offerings in Shanghai and Shenzhen.

Last week, Brazilian oil giant Petrobras (NYSE: PBR) tapped investors for a record $70 billion in one fell swoop, capitalizing on the strong demand for emerging-markets equities. And it was held on Sao Paulo’s Bovespa exchange.

They’re gearing up for a “flood” of IPOs in Hong Kong, everything from a spinoff of the Asian operations of AIG (NYSE: AIG) to a miner of coal in Mongolia. The Hang Seng index is up 9% this month, tempting seekers of capital from all over.

In India, where the Sensex is up 142% in 19 months, foreigners are still buying in ather than selling out. Locals haven’t been as shy, nor more discerning.

The getting has been so good that markets have barely blinked at the renewed food fight over the proper value of China’s currency. The notion that a higher yuan would bring back US jobs seems as fanciful as the Chinese premier’s claim that appreciation of even 20% would expose China to “major social upheaval.”

Unpopular incumbents in the West have good reason to feel insecure. For those unwilling to pick on the Mexicans or the Roma, increasingly prosperous but heavily managed China may suffice as a scapegoat.      

Investors piling into Chinese IPOs in New York are rooting for a higher yuan to stoke more domestic Chinese growth. Beijing seems ready to oblige, on its own terms.

In the meantime, SouFun, Jinko, and Baidu (Nasdaq: BIDU), which is up 148% year-to-date, are signaling enthusiasm not yet matched in Shanghai, which has continued to disappoint. David Fuller thinks the tone there might improve soon as IPOs ease up, while his colleague Eoin Treacy expects India to keep climbing the wall of worry.

With the dollar on the defensive, a freely traded currency such as Chile’s could rise much faster than the yuan. That would only enhance the appeal of a closed-end fund recommended by Carla Pasternak. It already pays a generous yield despite profiting handsomely from the Chilean bull market.

The Canadian drilling specialist favored by Roger Conrad offers a decent payout as well, in addition to its rapidly improving business prospects.

You’ll get no dividend sweating the future of Ireland and Portugal. Let that be someone else’s problem.

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