Goldman Sachs is in no doubt about one of the reasons to buy Bank of East Asia (BEA) shares. In a report, its analysts wrote that the largest independent local bank in Hong Kong has a number of unique revenue drivers that many other Hong Kong banks would “kill” to have, including a leading position among foreign banks in China –18.3% of its loans are on the mainland.
China’s decision on July 21 to replace its currency peg to the US dollar with a managed floating exchange rate regime has been welcomed by those clamouring for currency reform. But the relatively small 2.1% revaluation of the renminbi leaves many questions unanswered.
China has entered a new cycle of growth and is willing to integrate further into the world economy, contributing to the greater global good, according to Jin Renqing, the Chinese finance minister. The politician was speaking at a presentation to mark his acceptance of The Banker’s Finance Minister of the Year, Asia award in London early last month. Mr Jin outlined the latest macroeconomic developments in his home nation and revealed Chinese efforts to maintain a stable economic outlook.
Banking analysts say that there are about 30 city commercial banks among China’s city lenders that have decent balance sheets and are worth considering for investment. Though the banks still need more capital injections from local and foreign strategic partners, they are small and do not require multibillion-dollar investments.
Wenzhou City Commercial Bank, Hangzhou City Commercial Bank and Ningbo City Commercial Bank, all lenders thriving on the booming private economy of Zhejiang Province, are front-runners in improving capital adequacy ratios, reducing NPLs and shifting from shareholder bases dominated by local government entities to those comprised mainly of private companies. Analysts say that these are among the top choices after Suzhou City Commercial Bank. Potential foreign investors have been visiting them.
Suzhou City Commercial Bank has a lot going for it and plenty of foreign suitors are lined up hoping for a stake. One factor may be the charm of its location – China’s famed garden city, just an hour away from Shanghai in the country’s fastest growing industrial region. But a bigger factor is probably its clean balance sheet.
China’s first privately owned bank, China Minsheng Banking Corp, is likely to be the top choice for foreign banks, given its nationwide networks and good financial health. The Beijing-based bank’s biggest shareholder is New Hope Capital, a unit of livestock feed conglomerate Sichuan New Hope Agribusiness Corp, which owns a 6.98% stake.
International banks are looking for a piece of China’s banking market. Kazuhiko Shimizu, in Shanghai, sizes up the most promising acquisition targets.The race is on to get into the market but finding suitable acquisition targets is not easy. Getting involved with the big four state-owned banks, laden with non-performing loans, would be tricky.
Morgan Stanley’s China business is highly profitable, says co-head of China investment Jonathan Zhu. He tells Karina Robinson, in Beijing, about the bank’s winning strategies. China may be slowing down as the authorities cut back on credit availability but foreign investment banks’ business is being boosted: as the government puts the brakes on credit, domestic companies are turning abroad for their funds and Morgan Stanley is one of the beneficiaries.The US-headquartered investment bank ranks number two in Chinese equity capital markets in the year-to-date with a deal value of $2589m, giving it a 19% market share, according to data provider Dealogic.
Hong Kong’s Financial Secretary Henry Tang tells Karina Robinson the reasons he believes are behind the resurgence of China’s Special Administrative Region. Q To what do you ascribe Hong Kong’s economic recovery? You have upgraded your forecasts to 7.5% GDP growth in 2004.A A combination of factors. They say timing is everything and I agree. In the first quarter of 2003, when I was Secretary of Commerce, Industry and Technology, the figures were already showing signs of recovery. Unfortunately, the light at the end of the tunnel was the headlight of an oncoming train. It was a situation where a budding recovery was ruined by one quarter of [the respiratory disease] SARS. [But in addition] the Free Trade Agreement was signed with the People’s Republic of China. [People saw that the mainland government] was prepared to put money where their mouth is. It is not just one country two systems, they also support us and help us improve our situation [for example through allowing] individual travel [for China mainlanders]. Also, Hong Kong people are particularly adaptable and resilient. I have lived in Hong Kong for the better part of my life and have seen Hong Kong come through many crises.