Tag Archives: China Merchants Bank

FINANCE: Fosun Ups Club Med Bid, Anbang Courts Minsheng

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Bottom line: Fosun is prepared to up its latest bid for Club Med by another 20-30 percent, while Anbang needs to be careful in its investments to avoid ending up with a portfolio of overvalued, underperforming assets.

Fosun ups Club Med bid

Two of China’s most active institutional investors are in the headlines today, led by a new sweetened bid from private equity giant Fosun International (HKEx: 656) as it competes with an Italian group to buy French vacation resort operator Club Med (Paris: CU). Meantime, another recently acquisitive investor Anbang Insurance is back in the headlines, with word that it’s boosted its stake in Minsheng Bank (HKEx: 1988 Shanghai: 600016), China’s oldest and largest privately owned lender. Read Full Post…

Alibaba Makes Peace With Banks In Lending Tie-Up

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Alibaba in new alliance with banks

A year after it shook up China’s stodgy banking sector with the launch of its Yu’ebao savings product, e-commerce leader Alibaba looks set to give the market another shot of needed innovation in a new tie-up with 7 major banks. This time the aim is to promote lending to small and medium-sized enterprises (SMEs), with a focus on manufacturers and especially exporters. Such companies often have difficulty getting loans from traditional banks for reasons I’ll explain shortly. Thus this new partnership aims to use Alibaba’s mountains of financial data on these smaller companies to help the banks better understand underserved SMEs that are a critical player in China’s economy. Read Full Post…

Guangzhou Buys HK Bank, More To Come?

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Guangzhou buys HK’s Chong Hing Bank

A new deal that has seen a mid-sized Hong Kong bank purchased by a government entity of the southern city of Guangzhou is raising the interesting prospect that we could soon see a grab for similar banks by Chinese lenders looking to go global. As a financial center with strong cultural and geographic ties to the mainland, Hong Kong is a natural stepping stone for any Chinese bank that might want to move beyond its home turf, where politics dominate many decisions, into Asian markets where profits are the driving factor. That urgency to move abroad could become stronger in the next few years, as China signals it will soon open up the state-dominated banking sector to private investors. Read Full Post…

AgBank Eyes Baby Step Onto Global Stage

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AgBank eyes HK’s Wing Hang

Agricultural Bank of China (HKEx: 1288; Shanghai: 600188), the last of China’s “big 4” banks to go public, is now becoming the last of the quartet to eye a global expansion, with word that it’s weighing a bid for Hong Kong’s Wing Hang Bank (HKEx: 0302). I’m generally not a huge fan of AgBank, mostly because its history as a lender to farmers and other agricultural enterprises makes it the least market-oriented of China’s biggest 4 national lenders. But that said, this baby step onto the global stage looks like a relatively well conceived plan for perhaps some bigger steps in the next few years. Read Full Post…

WeChat Faces US Skeptics, Banking Friction

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WeChat scores a hit in HK, Taiwan but could face resistance in US

I’ve been traveling through Hong Kong, Taiwan and Macau these last few days, so thought I’d end the week with a look at Tencent’s (HKEx: 700) hugely popular WeChat mobile messaging service and the challenges it faces in its quest to go global and commercialize. I’ve been quite surprised by how widespread WeChat, known in Chinese as Weixin, has become in all 3 of these Chinese-speaking areas. But at the same time, comments from one of my industry friends also indicate Tencent could face an uphill battle winning acceptance in the US, where it could face heavy competition from rival products and skepticism due to its China connections. New media reports also indicate WeChat’s hyped new relationship with China Merchants Bank (HKEx: 3968; Shanghai: 600036) may also be running into problems, indicating the road to commercialization may not be as smooth as Tencent had hoped. Read Full Post…

News Digest: August 14, 2013

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The following press releases and media reports about Chinese companies were carried on August 14. To view a full article or story, click on the link next to the headline.
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  • Baidu (Nasdaq: BIDU) In Talks To Acquire Nuomi, Ding Ding Map (English article)
  • UPS (NYSE: UPS) Expands Logistics Reach To Meet Emerging Demand in China (Businesswire)
  • Simcere Pharmaceutical (NYSE: SCR) Reports Q2 Results (PRNewswire)
  • Whirlpool (NYSE: WHR) Buys 51 Pct Of China Appliance Maker (English article)
  • China Merchants Bank (HKEx: 3968) To Raise 35 Bln Yuan In Rights Offer (Chinese article)
  • Latest calendar for Q2 earnings reports (Earnings calendar)

Bank of China Joins Beggars Queue, More to Come 中行或拉开新一轮银行融资潮序幕

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After a flurry of capital raising in the beginning of the year, China’s banks have been silent over the last 6 months despite my previous predictions that 2012 would see a big flurry of money raising by these financially-challenged companies. But now that silence has abruptly ended with word that Bank of China (HKEx: 3988; Shanghai: 601988), one of the nation’s top 4 lenders, is preparing to raise about 23 billion yuan, or around $3.7 billion, through a subordinated bond offering. (English article) So now the question becomes: is this the beginning of a new flurry of fund-raising by China’s banks? The answer is a definite “probably”, though in this case we’ll probably simply see the banks that didn’t raise capital late last year or early this year engage in new fund raising.

Read Full Post…

China Life Joins Financial Begging Line 中国人寿加入融资潮 暗含行业危机

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The smoldering crisis quietly seeping through China’s financial services sector has infected the nation’s largest insurer, China Life (HKEx: 2628; Shanghai: 601628), which has announced plans to raise about $6 billion this year through the issue of subordinated debt, becoming the latest player to turn to financial markets to raise billions of dollars in new cash as provisions for shaky investments. (English article) The entry of China Life into the beggar’s cue is quite significant, as up until now the latest cash-raising frenzy has been confined mostly to big state-controlled banks that made questionable loans under a Beijing-ordered lending spree to stimulate the economy at the height of the global financial crisis. China Life’s biggest rival, Ping An Insurance (HKEx: 2318; Shanghai: 601318), also previously went to financial markets not once but twice last year, announcing plans to raise a total of more than $6 billion as well. (previous post) But unlike Ping An, which is considered a relatively aggressive investor, China Life is known for its conservative investment policies. As such, the fact that its investments are also running into trouble could be an early warning sign that the problems in China’s financial system run much deeper than industry and government officials realize or are admitting. Beijing has already made several moves to ease the burden on Chinese banks, including a potential plan to let them delay collecting repayment on many of the problematic infrastructure loans they made to local governments that may now be in danger of default. (previous post) China Life announced its fund-raising plan after reporting its quarterly profit slumped 86 percent in last year’s fourth quarter, its worst-ever decline. A 22 percent slump in China’s stock market last year certainly contributed to China Life’s woes, as the company invests up to 10 percent of its money in stocks. But I suspect that such a big profit decline, combined with big fund-raising plans, indicate that stocks alone weren’t responsible for the big downturn, and that many of China Life’s other investments also may be running into problems. The company joins a growing list of major financial institutions that have announced multibillion-dollar capital raising plans in the last half year, including Ping An, Bank of Communications (HKEx: 3328; Shanghai: 601328), China Merchants Bank (HKEx: 3968; Shanghai: 600036) and ICBC (HKEx: 1398; Shanghai: 601398). Minsheng Bank (HKEx: 1988; Shanghai: 600016), one of the nation’s most entrepreneurial lenders, announced its own intent to raise funds last month, and earlier this week gave final details for the $1.4 billion planned Hong Kong share sale. (English article) Look for more fund-raising plans this year, accompanied by significant asset write-downs at both the insurers and banks as the defaults start to swell. From an investor standpoint, unless you have a strong stomach I would say that stocks for these and other major financial institutions look like volatile bets for at least the next 1-2 years.

Bottom line: China Life’s new $6 billion capital raising plan indicates China’s building banking crisis may be worse than most people realize.

Related postings 相关文章:

◙ AgBank Results: First Look at Banking Winter 中国农业银行财报：银行业的冬天

◙ Bocom Recapitalizes, Govt Pays the Bill 交行再融资或掀起新一轮银行再融资热潮

◙ More Banking Bad News From Minsheng 民生银行融资揭示银行业困境

 

Bocom Recapitalizes, Govt Pays the Bill 交行再融资或掀起新一轮银行再融资热潮

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The latest round of capital raising by major Chinese banks continues with the news that Bank of Communications (HKEx: 3328; Shanghai: 601328), the nation’s fifth biggest lender, has just recapitalized to the tune of $8.9 billion. But in a telling sign that investors have tired of this latest round of fund raising, the government has stepped in to pay most of the bill this time, setting a pattern for a growing number of bank recapitalizations likely to happen in the months ahead. In many ways, it’s only appropriate that Beijing help these banks bolster their finances, as the current weakness in their balance sheets is the direct result of their compliance with a government’s directive that saw them make record loans under a national economic stimulus package at the height of the global downturn in 2009 and 2010. In this latest development, BoCom has just raised a hefty $8.9 billion through a private placement with a group of buyers mostly linked to major state-owned entities, including the finance ministry, the national pension fund, and China’s state-owned tobacco monopoly. (English article) While ordinary shareholders won’t have to pay for this recapitalization directly, they will still pay indirectly through  the dilution of their holdings in BoCom, which will issue millions of new shares as part of this private placement. BoCom is just the latest in a string of Chinese banks and other financial institutions to raise major new capital over the last year, as most race to strengthen their overextended balance sheets after the lending binge of 2009 and 2010. Many worry the banks’ finances could come under further pressure as many of the questionable loans made during that period end up defaulting, though the government is also taking steps to try to avoid that situation by allow banks to delay collection of repayment on many of those loans. (previous post) Other banks to announce big new fund-raising plans over the last year include Minsheng Bank (HKEx: 1988; Shanghai: 600016), which just last month announced plans to raise up to $1.6 billion, as well as leading lender ICBC (HKEx: 1398; Shanghai: 601398) and China Merchants Bank (HKEx: 3968; Shanghai: 60036). (previous post) Analysts previously said that BoCom was likely to need more money, and also mentioned Agricultural Bank of China (HKEx: 1288; Shanghai: 601288) as another top bank that could need new capital in the near future. Any investors with a memory will recall that this latest round of capital raising comes just 2 years after a similar massive round that saw the nation’s major lenders raise more than $100 billion collectively to improve their weak finances. Of course if someone was giving me billions of dollars in new capital every 2 or 3 years, I could probably also run a bank that looked very profitable on paper! But unfortunately, I have no benefactor like the Chinese government or investors who like the China banking story, which is looking increasingly unattractive with the announcement of each new fund raising plan.

Bottom line: BoCom’s new fund raising plan is the latest from China’s banking sector, with more likely to come this year as Beijing shows growing willingness to pay the bill.

Related postings 相关文章:

◙ More Banking Bad News From Minsheng 民生银行融资揭示银行业困境

◙ 2012: Capitial Raising II Year For China Banks 2012：中国银行业的又一个融资年

◙ Message to Beijing: Privatize the Big 4 Banks 对中国政府说：将四大银行退市吧

More Banking Bad News From Minsheng 民生银行融资揭示银行业困境

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The latest sign of trouble is emerging from China’s banking sector, where Minsheng Bank (HKEx: 1988; Shanghai: 600016), one of the nation’s more commercially-focused lenders, has just announced plans to raise up to $1.6 billion or more to bolster its shaky capital base, even as Beijing is encouraging banks to lend even more. Minsheng’s plan would see it issue new H-shares in Hong Kong, and could also see a convertible bond offering linked to its Shanghai-listed A-shares, according to a filing with the Hong Kong stock exchange. (HKEx filing; English article) The new fund raising would follow similar recent moves by ICBC (HKEx: 1398; Shanghai: 601398), China Merchants Bank (HKEx: 3968; Shanghai: 60036) and Ping An Insurance (HKEx: 2318; Shanghai: 601318), and are likely to be followed by more such announcements this year as many of the loans made to local governments in 2009 to boost China’s economy during the financial crisis start to sour. This latest share issue from Minsheng is particularly worrisome, as the privately-funded bank is one of China’s few major players that doesn’t count the government as its major stakeholder, meaning it is more commercially focused and better reflects true market conditions. Look for more capital raising plans in the next few months, with analysts saying Agricultural Bank of China (HKEx: 1288; Shanghai: 601288) and Bank of Communications (HKEx: 3328; Shanghai: 601328) both looking likely to need new cash soon. The new round of cash calls is even more alarming than a similar round 2 years ago, as this time the banks, despite their shaky balance sheets, are also being called on by Beijing to boost their lending as economic growth shows signs of slowing sharply. Beijing is making its call even though it has also ordered banks to sharply cut back on their loans for mortgages and to local governments, which are 2 major sources for new lending. As a result, one of the few outlets for new loans has been the stock market, which has rallied 10 percent since the beginning of the year on a flood of new money into stocks. Reflecting the unbalanced situation in the stock market, newly listed Jishi Media (Shanghai: 601929) soared 87 percent in its trading debut in Shanghai on Thursday. (English article) Sure, perhaps Jishi is an interesting company as China finally starts to let its media companies go public. But at the end of the day, Jishi is still just a tiny national player and shouldn’t be getting this much attention. Look for the stock market rally to continue as long as banks keep boosting their lending, and then for problems to set in later this year when the rally fizzles and many of the new loans start to sour.

Bottom line: Minsheng Bank’s new capital raising plan is the latest for China’s troubled banking sector, with more to come this year as banks try to obey Beijing’s orders to boost their lending.

Related postings 相关文章:

◙ 2012: Capital Raising II Year For China Banks 2012：中国银行业的又一个融资年

◙ Banks to Lend More, But to Whom? 银行获准增加放贷 但流向选择有限

◙ Ping An Returns to Market With Second Big Fund Request 中国平安拟发大规模可转债

China Banks: More Trouble Signs

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Just a week after a leading Chinese newspaper predicted a new wave of capital raising by China’s banks this year, the latest trouble sign is emerging for the overstretched sector with news that Beijing will delay implementing tougher new capital requirements. The China Daily is citing a Bank of China (HKEx: 3988; Shanghai: 601398) official saying the banking regulator will postpone tougher new requirements, which were supposed to take effect on January 1, to the second half of the year instead. The news comes as signs mount that balance sheets at China’s banks are coming under growing pressure as the real estate market shows early signs of a major correction and the stock market fell 20 percent in 2011, both of which point to a big rise in souring loans this year. Last week, ICBC (HKEx: 1398; Shanghai: 601398) launched a nearly $8 billion subordinated bond offering to raise its capital adequacy ratio in anticipation of the new requirement, looking to the debt market to boost its capital. (English article) That came after the China Securities Journal wrote last week that many lenders, including Agricultural Bank of China (HKEx: 1288; Shanghai: 601288), one of China’s top 4 state lenders, and Bank of Communications (HKEx: 3328; Shanghai: 601328), a top regional lender, will need to replenish their capital this year, following a lending binge in 2009 and 2010 under orders from Beijing to boost the economy during the global downturn. (previous post) This new recapitalization will come only 2 years after a similar exercise that saw banks raise more than $100 billion collectively, again prompted by their overzealous lending during the global downturn. China Merchants Bank (HKEx: 3968; Shanghai: 600036), another major regional lender, kicked off the drive in the middle of last year with a plan to raise $5.4 billion. The contagion this time has shown signs of spreading to the insurance sector, with Ping An (HKEx: 2318; Shanghai: 601318), China’s second largest insurer, also announcing a plan in December to raise more than $4 billion. No matter how you look at it, 2012 will be a challenging year for Chinese banks and perhaps even tougher for their investors.

Bottom line: The delay of new tougher capital requirements is the latest sign of trouble among China’s banks, which will soon launch a major new capital raising drive.

Related postings 相关文章:

◙ 2012: Capital Raising II Year For China Banks

◙ Ping An Returns to Market With Second Big Fund Request 中国平安拟发大规模可转债

◙ Message to Beijing: Privatize the Big 4 Banks 对中国政府说：将四大银行退市吧