The shares of two Chinese companies considered that nation's YouTube and soared in their U.S. debuts on Wednesday as investors bet they could become leaders in a still-nascent market.

Online video company Inc's stock opened at $27, 110.9 percent above its $12.80 IPO price. The shares rose as high as $37 before giving up some of the gains to trade around $33 at midday.

The shares of online retailer E-Commerce China Dangdang Inc opened at $24.50, 53.1 percent above their $16 IPO price. They rose as high as $30.10 before easing somewhat to $29.12 in midday trading.

Investors like to get in early in companies that could end up dominating their markets, said Paul Bard, an analyst at Connecticut-based IPO research and investment house Renaissance Capital.

You have two potential leaders in two potentially massive markets in China. I think that's being reflected in their trading today.

Investors are looking for high quality, high growth companies in China that can scale their businesses as more Chinese consumers come online, Dangdang Chief Financial Officer Conor Chia-hung Yang told Reuters.

They look at the success of Amazon and they look for that in China, said Yang, citing a market of 100 million online shoppers. We are in the early stages of the growth.

So far this year, Chinese companies making their debut in the United States are posting returns of about 30 percent, according to Thomson Reuters data.

That contrasts with an average return of about 23 percent for all U.S. IPOs this year, including for companies based in China, according to data from Renaissance Capital.


Still, there have been some flops. The shares of Chinese online retailer Mecox Lane Ltd, which were launched in late October, are currently trading 39.2 percent below their $11 IPO price.

Soon after its IPO, Mecox reported a year-on-year drop in its gross margin, causing its shares to swoon and triggering several class action lawsuits.

Youku and Dangdang's greatest challenges may lie on their balance sheets. Both are in competitive businesses and both are fighting for profitability.

Youku's revenue increased by an average of 1,000 percent a year over the past two years and was up 135 percent in the first nine months of the year over the year-earlier period -- but it has never turned a profit.

Dangdang fared slightly better. It swung to a roughly 16 million yuan profit from a 5.2 million yuan loss in the first nine months of 2010. Revenue grew 55.6 percent to 1.6 billion yuan in the same period.

The company holds 50 percent market share for books and media and is currently expanding to general merchandise categories such as beauty, home and lifestyle and baby goods.

We want to leverage our client base and execution in the media sector and then go into general merchandise, Yang said, adding that, in the first nine months of 2010, some 6.8 million active customers had placed orders. That is up from 1.9 million in 2007 and 6 million in 2009.

Dangdang currently reaps half of its business from customers in first tier cities in China, but the company can deliver goods to 750 cities around the country and collect cash -- the payment method of choice -- on the spot.

Youku sold 15.8 million American depositary shares for $12.80 each on Tuesday, raising about $203 million. It had planned to sell 15.4 million shares at $9 to $11.

Dangdang priced its IPO at 14.3 percent above the expected range on Tuesday, raising $272 million by selling 17 million American depositary shares for $16 each.

The company previously raised the expected price range for its IPO.

Credit Suisse Group AG and Morgan Stanley led the underwriters on the Dangdang IPO, while Goldman Sachs Group Inc led Youku's underwriters.

Both companies are trading on the New York Stock Exchange, Youku under the symbol YOKU and Dangdang under DANG.

(Reporting by Clare Baldwin; additional reporting by Alexandria Sage, Leah Schnurr and Chuck Mikolajczak; editing by Lisa Von Ahn, Tim Dobbyn and Andre Grenon)