IPOs do well in India, Brazil, China despite global slump

In the midst of the biggest drop in global equities in five years, investors are profiting from initial public offerings from Brazil to India. Those opportunities will keep appearing in the months ahead.

Bovespa Holding SA, owner of Brazil's biggest stock exchange, has risen 47 per cent since trading started October 26 versus a 1.1 per cent gain in the nation's benchmark index. India's Mundra Port & Special Economic Zone has surged 110 per cent since its IPO last week; the Sensitive Index rose 0.6 per cent.

Athletic clothing company China Dongxiang (Group) Co advanced 23 per cent since its October 9 debut, while the Hang Seng Index in Hong Kong, where the stock trades, is up 1.5 per cent.

More than half the record $255 billion raised this year through IPOs globally came from emerging markets, where economic growth is more than triple the rate of developed nations.

Consumer, industrial and financial companies that went public since September 30 have posted an average 11.5 per cent gain compared with the MSCI World Index's 1.4 per cent slump, data compiled by Bloomberg show.

IPOs planned by XTEP (China) Co, a sneaker maker, and Bolsa Mexicana de Valores SA, owner of Mexico's bourse, may attract similar interest.

"People are uncertain about the growth outlook in developed markets, but they can certainly see plenty of growth potential in emerging markets," said Alex Tedder, who purchased Bovespa during the IPO and helps manage $7 billion in global stocks at American Century Investments in New York. "These things are in great demand."

Global Declines
The end of the buyout boom and the first decline in US profits in five years sent the Standard & Poor's 500 Index down 10 per cent for the first time since 2003 last month and erased more than $4 trillion from equity markets globally.

Still, investors snapped up new shares of Sao Paulo-based Bolsa de Mercadorias & Futuros-BM&F SA, Latin America's biggest derivatives market, in its IPO last week, offering to buy 14 times more stock than the company sold, according to a person familiar with the sale.

The stock jumped 20 per cent on its first day of trading.

China, India, Brazil and other emerging-market nations will expand 7.4 per cent next year, compared with a rate of 2.2 per cent in industrialised regions including the US, Japan and Europe, according to International Monetary Fund projections.

In the US, where subprime mortgage losses have caused the worst housing recession in 16 years, the economy may expand 1.9 per cent in 2008, according to the IMF.

'Little Rusty'
"The emerging markets are a few steps removed," said Henrik Strabo, chief investment officer at Clay Finlay Inc in New York, which manages more than $5 billion.

"Even if things get a little rusty here, the emerging markets will still be OK."

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ON A HIGH

Bovespa Holding SA, owner of Brazil's biggest stock exchange, has risen 47 per cent since trading started October 26 versus a 1.1 per cent gain in the nation's benchmark index

India's Mundra Port & Special Economic Zone has surged 110 per cent since its IPO last week; the Sensitive Index rose 0.6 per cent