Small U.S.-listed China firms good buys:Guerrilla

NEW YORK (Reuters) - The rising number of small but rapidly growing Chinese companies that are going public in the United States provide good investment opportunities, a hedge fund manager said on Tuesday.

Guerrilla Capital Management, which runs a U.S. hedge fund, is launching a China-focused hedge fund in January to tap such opportunities as more small Chinese firms seek listings outside the mainland, Peter Siris, managing director of Guerrilla Capital, told the Reuters Investment Outlook 2007 Summit in New York.

"It's a great opportunity because you have these really fast-growing companies in business with limited competition and great managements selling at really inexpensive multiples," Siris said.

In the second half of 2006 the firm bought China Security & Surveillance Technology Inc. CSCT.OB, a provider of security and surveillance systems, which has already tripled, he said.

"You would have looked at a company growing triple digits, selling at that point for three times earnings," he said.

Another Chinese company Guerrilla has invested in is SORL Auto Parts (SORL.O: Quote, Profile, Research, Stock Buzz), which makes air brakes for automobiles. Siris said the firm has lined up 15 more Chinese companies for investments.

He said about 700 such small Chinese firms are currently listed in the U.S. and about 10 new firms arrive every week seeking to list.

"Investors say I can participate in China and buy U.S.-listed stocks that are GAAP reporting. And you don't have to worry about local Chinese investing in these companies because, in fact, they are not," Siris said.

But investors have to do their research thoroughly before committing money to these firms because there's a risk of fraud, he added.

"Every day, these Chinese companies that come over here, they want to raise money and some of them are going to be frauds. But you get some really fantastic managements," Siris said.