The average price/earnings (P/E) ratio of the manufacturing industry is generally higher than the average P/E ratio in the Korean stock market: The former is approximately 18 and the market average is only 11. At present, among the 1,600 publicly listed companies in Korea, 60 percent of them are manufacturing companies, which again demonstrates the clear preference toward manufacturing companies in Korea. Yang Tae-Young, also from KRX's Asia office, confirmed this. "Compared to the preference of overseas stock exchanges toward the finance, real estate and service industries, we prefer manufacturing companies," he said.

"In line with this, Korean investors prefer industries with stable growth and good size," Ma Jun analyzed. The manufacturing industry matches this criterion. Moreover, "in the Korean stock market, the manufacturing industry accounts for as high as 60 percent. In China, it accounts for 45 percent in the Shanghai Stock Exchange and 17 percent in the Hong Kong Stock Exchange."

Since its opening up to Chinese companies in January 2005, the KRX has investigated dozens of companies in China; most of which are in the manufacturing industry. Zhang Bin, Manager of the Listing Department of Sichuan Kaiyuan Group, said that KRX places great importance on the manufacturing and chemical industries. The policy support and rich experience of Korea in the manufacturing industry matches the expectations of Sichuan Kaiyuan Group.

"If Chinese manufacturing companies go public in Korea, they must be able to issue the stocks at a high price," Han Chang-Woo said confidently. "The main industry structure in China and Korea is similar, which will be helpful to Chinese companies as they become the new investment highlight in the Korean stock market."

Who will break through first?

"We warmly welcome Chinese companies to come to Korea and be the first to break through and list," Lee Young-Tak, Chairman and CEO of KRX, recently asserted.

"Although we are holding promotional events in the Southeast Asia region, including Vietnam and India, the first company to be listed in Korea will be a Chinese company," Kang Young-Seong assured.

This company will be Shishi Huafeng Textile International Group Co. Ltd. (Huafeng Textile), a well-recognized enterprise in the Chinese textile industry. "On December 28, 2006, Huafeng Textile submitted a preliminary evaluation application to us, and given a smooth evaluation. Huafeng Texitle is expected to be listed in Korea by April," Kang said.

Established in 1988, Huafeng Textile is a joint venture that specializes in fabric manufacturing, dyeing and processing. Their business covers over 20 provinces and cities in China and the Southeast Asia region. The company went public in Hong Kong in August 2002, raising over 200 million yuan, and in May 2006, signed an underwriting agreement with Daewoo Securities.

Han Chang-Woo pointed out that the first Chinese company to be listed in Korea is expected to benefit from the "effect of a break through, to be the first to list," and will enjoy an appreciation in stock price due to unusually high attention from the media and investors.

According to Ma Linjiang Law Firm, both Hyundai Securities and Daewoo Securities from Korea have established branches in China, where domestic investors can open accounts in order to access the Korean stock market.

(Xinhua Finance)