Shanghai Hai Xing Shipping Company

25 Pages Posted: 14 Jun 2009

See all articles by Robert M. Conroy

Robert M. Conroy

University of Virginia - Darden School of Business

John Wei

affiliation not provided to SSRN

Abstract

This case illustrates the valuation issues one faces when valuing a company in an emerging market. It focuses on the decision by a Chinese company on the Hong Kong Stock Exchange to participate in an IPO (initial public offering). The case provides background information on the listing of Chinese companies on the Hong Kong Stock Exchange. It also presents an interesting valuation problem and affords an opportunity for a class discussion on Chinese companies in general and the risks of investing in Chinese companies.

Excerpt

UVA-F-1224

SHANGHAI HAI XING SHIPPING COMPANY

The usual investment strategy of fund managers in Asia is to buy, visit the company and sell.

Robert Howe, CFA, Chief Investment Officer, Geomatrix

Ed James of Standish-Paul International (SPI) had just gotten off the phone with his boss in London when he noticed that the latest news on the screen was that the long awaited issue by Shanghai Hai Xing Shipping Company (SHXS) which had been postponed in July, was finally coming to the market in two weeks on November 14, 1994. This would be the twelfth H-share issue on the Hong Kong Stock Exchange by a mainland Chinese company. James managed SPI's Pacific Basin Fund and he was under a great deal of pressure to have Mainland Chinese companies in his portfolio. All of the recent publicity about the potential in China had focused investors' attention on funds with a portion of their moneys in Chinese companies. The pressure was based upon concerns about performance, if the Chinese market really did take off, any fund without a position would under perform the indexes. There were also concerns about marketing. Without a position in Chinese securities, the fund would be less attractive to many of SPI's clients who used the fund for their Asian exposure.

Recent experiences with investments in mainland Chinese companies had not been good. Thus, James was not overly enthusiastic about adding another stock to his portfolio. He would have felt more comfortable adding Shanghai Hai Xing Shipping if it was fairly valued but he was concerned about the uncertainties. In any case, any decision had to be made quickly if he was going to get in on the SHX initial public offering.

. . .

Keywords: Equity, portfolio management, valuation

Suggested Citation

Conroy, Robert M. and Wei, John, Shanghai Hai Xing Shipping Company. Darden Case No. UVA-F-1224, Available at SSRN: https://ssrn.com/abstract=1418855

Robert M. Conroy (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://www.darden.virginia.edu/faculty/conroy.htm

John Wei

affiliation not provided to SSRN

No Address Available

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