Evan Gul, the CEO of Zhaopin Limited (ZPIN), was smiling from ear to ear on the floor of the NYSE this morning.
He had good reason to smile. His company, which runs China's second biggest online job board for white-collar workers, had just gone public, pricing 5.6 million shares at $13.50, in the middle of the $12.50 to $14.50 range, and closed at $14.65, up 8.5 percent.
Gul had just become a wealthy man. He was asked if he was worried about reports that China's growth was slowing down.
Gul said he wasn't worried, and implied that it was the wrong question. We should be more interested in the demographic and sociological trends that were emerging in China.
Gul said he followed a simple rule: Follow the Starbucks. Starbucks represents the urbanization of China. The country is switching from a tea culture to a coffee culture.
It's also moving from a manufacturing base to a service base. Right now 45 percent of the GDP is manufacturing, but that is getting smaller as the services sector expands.
And it is expanding rapidly. China has 1.6 billion people, with 700 million in the workforce. And there is now 100 million white collar workers.
Not only are their ranks growing, they are making more money. Salaries, he notes, have been increasing because there have been labor shortages in key industries, particularly white-collar jobs.
That's why, despite genuine concerns about China's growth, investors continue to pile into Chinese IPOs listing in the U.S.
Chinese IPOs have outperformed U.S. IPOs this year by a wide margin. On average, last year's Chinese IPOs are up 63% from their IPO price (almost half on the first day, the other half post-first day), according to Renaissance Capital. The average U.S. IPO is up 25 percent in that same period.
Why? Despite the worries about slower growth in China, everyone wants to get on board with the explosive growth in internet services in China, which is itself a reflection of the changing demographics Mr. Gul is talking about.
But all trends have their day, just ask biotech, which is now lagging other IPO sectors this years. There is a worry is that the Alibaba IPO may take the air out of the Chinese IPO market. Still expecting an IPO in August, but much depends on how many questions the SEC has for the company.
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