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Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: wsw1 who wrote (3027)	10/26/2006 1:00:56 AM
From: wsw1	Read Replies (1) \| Respond to of 50685

Chinese Bank Stocks: What, Me Worry? Despite the industry's murky past, investors can't get enough of mainland bank shares. And a new crop is about to hit the market Nothing much seems to faze global investors when it comes to China bank stocks. Chinese financial regulators concede that loan fraud and employee embezzlement still bedevil mainland lenders. And not many would disagree that if China's hyperactive economy overheats and then sharply contracts, the number of bad loans would soar. That's pretty much what happened in the late '90s when it took a massive mop-up operation of capital injections and other financial assistance by Beijing to prevent outright bank failures. Yet none of this seems to matter much now, at least judging by the ravenous demand for Chinese bank shares this year. Two big mainland state-owned banks, China Construction Bank and Bank of China, had little trouble selling a combined $22 billion-plus worth of share offerings over the past year in listings in Hong Kong and Shanghai (see BusinessWeek.com, 5/31/06, "A Golden Age for Chinese Banks"). HUGE NEGATIVES. Now a new torrent of bank shares is about to hit the market. China Merchants Bank, the nation's sixth biggest lender, is expected to raise $2.4 billion in a Hong Kong offering in early September that will be distributed by JPMorgan Chase (JPM ), UBS (UBS ), and China International Capital. Next up: The mainland's biggest lender, Industrial & Commercial Bank of China (ICBC ), will attempt to rake in $19 billion in a dual listing of shares in Hong Kong and Shanghai in October that is likely to be the biggest initial public offering in history. So are investors misguided for diving into Chinese bank shares despite their mixed record in managing their loan books, and spotty corporate governance? Not necessarily. In an economy that grew 10%-plus during the first half of 2006, the huge negatives don't really mean all that much. If you want a China play with broad exposure to the mainland economy, it's hard to pass up big banks that lend to so many different industries and will benefit from the country's prospering and growing middle class. "The financial sector is really one sector that you need to invest in" to capitalize on the China growth story, says Tat Auyeung, a fund manager at Apex Capital Management in Hong Kong. GROWTH BETS. "There is certainly positive sentiment from some global fund managers," figures Jing Ulrich, managing director and chairman of China Equities at JP Morgan Securities (Asia Pacific) in Hong Kong. Ulrich notes the bank shares are a "proxy play on the (China) growth story" and that the market for "consumer banking, mortgages, credit cards, and any consumer loans is still underpenetrated" on the mainland. That means plenty of growth opportunity for the better-managed Chinese banks in the years ahead. It's not just global investors who are rushing to get a piece of the action. Big international banks such as HSBC (HBC ), Bank of America (BAC ), UBS, Royal Bank of Scotland, Standard Chartered (SCBFF ), and others have plowed more than $20 billion into strategic equity stakes in Chinese banks in recent years. All are betting China's rapid wealth generation means a secure future for domestic and foreign financial service players well positioned in big urban mainland markets such as Beijing, Shanghai, and Shenzhen. Consider, too, that China's banking industry experienced more than 15% annualized growth in deposits from 2000 to 2005 and is tracking a similar pace in 2006. Even the campaign by Chinese President Hu Jintao's government to rein in bank lending and manage a soft landing for the economy isn't likely to have a big and lasting impact on bank earnings given the mainland's long-term growth prospects, analysts contend. ACQUISITIONS BANKROLL. Two modest interest rate hikes this year totaling a little more than 50 basis points on one-year loan rates haven't hurt at all. China Merchants Bank, a leader in the market for dual-currency credit cards, is expected to turn in profit growth of 40%-plus to nearly $700 million in 2006. Its stock is up 25% this year on the Shanghai Stock Exchange. Chinese banks are raising so much money in initial and secondary offerings that they will not only be able to strengthen capital bases but also bankroll acquisitions. The money being raised by China Construction Bank, Bank of China, China Merchants Bank, and ICBC later this year will bolster the balance sheets of mainland lenders and "put them in line with other banks in Asia," says May Yan, vice-president and senior credit officer with Moody's Asia Pacific in Hong Kong. The capital infusion will help these banks pursue their international ambitions as well. China Construction Bank, whose share price has appreciated more than 40% since its IPO last October, announced on Aug. 24 that it will spend $1.24 billion to buy the Hong Kong consumer banking operations of Bank of America. (BofA is a strategic investor in China Construction Bank and holds an 8.5% stake.) LOOKING AHEAD. The same likely will hold true for ICBC, China's biggest and arguably strongest bank with 21,000 domestic and 100 overseas branches. Thanks to a $15 billion government capital infusion a few years back, plus sales of non-performing loans to state-run asset management companies on preferential terms, its balance sheet is already in pretty good shape, according to Standard & Poor's. A big chunk of the $19 billion or so ICBC is expected to raise in its mega-IPO in October will finance acquisitions of other Asia banks. "As the largest bank in China, they have the ambitions to go international," says Moody's Yan. In the final analysis, China's better-run banks have a golden opportunity to tap the global capital markets and position themselves for growth at home and abroad. And for now at least, investors are willing to avert their eyes from the less than glorious past of Chinese banking. businessweek.com

To: wsw1 who wrote (3027)	10/26/2006 4:50:39 AM
From: wsw1	Respond to of 50685

Strong trading debut seen for ICBC's record IPO Wed Oct 25, 2006 11:15pm ET By Kennix Chim and Lu Jianxin HONG KONG/SHANGHAI, Oct 26 (Reuters) - Shares in Industrial & Commercial Bank of China, which raised $19 billion in the world's largest stock sale, are set to rise as much as 20 percent in their Hong Kong debut on Friday as investors who failed to secure enough IPO shares crowd into the secondary market. The lender, making the first simultaneous Hong Kong and mainland China listing, is expected to see its Shanghai shares rise by a more modest 10 percent as local shares in rivals Bank of China (3988.HK: Quote, Profile, Research) (601988.SS: Quote, Profile, Research) and China Merchants Bank (3968.HK: Quote, Profile, Research) (600036.SS: Quote, Profile, Research) have traded below their Hong Kong counterparts. The stock sale was the most popular in Hong Kong history, and unmet demand for shares, combined with a market trading at six-year highs and an offering priced at a discount to peers, should lift ICBC shares by between 15 percent and 20 percent on their first day in Hong Kong, market watchers said. The IPO, about 75 percent of which was sold to Hong Kong and global investors and the remainder in the mainland, surpasses Japan's NTT Docomo (9437.T: Quote, NEWS, Research), which raised $18.4 billion in 1998, as the world's largest share sale.An overallotment option is expected to lift ICBC's deal size to $21.9 billion. "As demand for the offering was strong, many institutional investors plan to buy shares in the market after they only received a small percentage of the IPO shares they sought," said Steven Leung, director of institutional sales at UOB-Kay Hian in Hong Kong. ICBC [ICBC.UL] (1398.HK: Quote, Profile, Research) priced its IPO at the top of an indicated range -- HK$3.07 in Hong Kong and the equivalent 3.12 yuan in mainland China -- after attracting demand of about US$400 billion for the Hong Kong portion of its deal and 780.7 billion yuan (US$99 billion) for its domestic deal. Rivals China Construction Bank (0939.HK: Quote, Profile, Research) and Bank of China saw their shares end flat and up by 15.3 percent, respectively, in their Hong Kong debuts. Construction Bank now trades 53 percent above its IPO price and Bank of China is up 15 percent. ECONOMIC PROXY Investors have clamoured for shares of Chinese banks as a proxy to take advantage of the country's 10 percent-plus economic growth and a consumer lending market in its early stages. That has helped offset concerns about credit quality and lending practices at Chinese banks. "ICBC's warrants and options are available in the first trading day, with the strong liquidity in the Hong Kong stock market, which will boost its H-shares performance," said Ben Kwong, chief operating officer at KGI Asia. ICBC's domestic debut is expected to be less robust. "Despite strong demand for ICBC's A-shares, the potential for a rise of more than 10 percent now appears to be limited because Bank of China's A-shares have persistently traded below their Hong Kong peers -- even right before ICBC's listing," said Zhou Lin, analyst at Huatai Securities. "This will have a negative psychological impact on ICBC's Shanghai debut," he added. Hong Kong Chief Executive Donald Tsang and the chairman of ICBC, Jiang Jianqing, will attend ICBC's Hong Kong listing ceremony. Its Hong Kong shares begin trading at 10 a.m. ((0200 GMT)) on Friday, while Shanghai opens 30 minutes earlier. KGI's Kwong expected Hong Kong shares in ICBC would rise at least 15 to 20 percent, higher than the A-share performance, because the Hong Kong market is more liquid, but he said eventually the gap would narrow. The pricing values ICBC at $129 billion, ranking it seventh among global banks, ahead of Wells Fargo (WFC.N: Quote, Profile, Research) and behind UBS AG (UBSN.VX: Quote, Profile, Research). The issue price represents 2.23 times ICBC's 2006 book value, less than the 2.64 times book valuation for China Construction Bank and the 2.38 times book for Bank of China. Bank of Communications (3328.HK: Quote, Profile, Research), China's number-five lender, trades at about 3.03 times 2006 book value, while China Merchants Bank is valued at 3.41 times book. (US$=7.8924 yuan) today.reuters.com