INTERVIEW-China "orphan" stocks heading home -Martin Currie

* Money manager bets on firms returning for domestic listings

* Says they could get better valuations if listed

By Samuel Shen and Royston Chan

SHANGHAI, Jan 11 (Reuters) - Chinese "orphan" stocks -- companies once lured to float overseas but now left neglected -- are starting to head home, creating investment opportunities, said the head of money manager Martin Currie's China business.

Martin Currie, which owns shares in Singapore-listed leasing firm Financial One Corp and London-traded medical device maker China Medical System Holdings Ltd, is betting that if such companies delist themselves and then float in China, Hong Kong or Taiwan, their share prices will jump.

Faced with a regulatory environment that long favoured large state-owned companies as well as slow approval processes, many smaller private firms chose to list overseas, especially in the first half of the past decade.

That is now changing, as the government is making fundraising easier for private companies, including by establishing a Nasdaq-style second board in Shenzhen, called the ChiNext.

"In the previous poor market, when listing was very difficult in China, quite a few Chinese companies went abroad and now ... we're starting to see companies come back," Chris Ruffle told Reuters Insider in an interview in Shanghai.

Such a migration, which involves delisting and relisting, may take as long as three years, Ruffle said.

"But there's quite some upside for patient investors there," he added.

(For the Reuters Insider video, see http://link.reuters.com/jas72h)

Edinburgh-based Martin Currie's strategy underscores the growing weight of China in global finance, as investors seek higher returns in a region that was less affected by the financial crisis than some western economies.

Hong Kong eclipsed the United States last year as the world's biggest IPO market, raising about $31.4 billion via initial public offerings, compared with the New York Stock Exchange's $17.5 billion and London's $1 billion, according to PricewaterhouseCoppers.

Taking advantage of ample liquidity and higher valuations on exchanges in Greater China, Shanghai-based biscuit maker Want Want Holdings Ltd delisted itself from Singapore and re-listed in Hong Kong in 2008, before floating shares last year in Taiwan in the form of depositary receipts.

Want Want, a household name in China, attracted little attention when it was listed in Singapore and traded at low multiples, Ruffle said.

Returning to float on local exchanges is a good move for Chinese firms, Ruffle said: "Each time they've done that, they got a premium on the valuation of the stock."

Martin Currie operates in China via a joint venture with Heartland Capital Management Ltd, called MC China Ltd.

MC China has identified more than 30 Chinese "orphan" stocks and has bought shares in 10 of them, betting they can be taken better care of if they return home, said Ruffle, co-chairman of the JV.

The 10 companies include London-listed Green Dragon Gas Ltd, Singapore-traded China Farm Equipment Ltd and food maker Hsu Fu Chi International Ltd.

MC China is also betting on China Milk Products Group Ltd and China Energy Ltd, both listed on the Singapore stock exchange. ($1=6.83 yuan) (Editing by Jason Subler)