Investments in China

Updated: 01/07/2007 09:18
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The Chinese major bank ICBC managed a fulminate debut of the world largest stock exchange course of economic history. The course of the ICBC shares rose to 18 per cent over the issue price at the Hong Kong stock exchange on the first commercial day.

Based on its market capitalization of approximately $146 billion, the money house is moved up with an impact on the fifth place in the squad of the world largest banks. Observers rated the stock exchange start of the largest Chinese credit givers as proof of the confidence of the investors in booming economics of the most populous country of the earth.

Briefly after commercial beginning the papers of the Industrial and Commercial Bank of China (ICBC) noted with 3,63 Hong Kong-dollar. This was nearly a fifth over the issue price of 3,07 Hong Kong-dollar. "There is an enormous demand", Investment manager of Tanrich Securities Jackson Wong said.

The demand for the ICBC papers before the first acceptance exceeded the quotation of 37-times and brought the ICBC about 22 billion $ receipts. Thus the stock exchange course is the world largest one so far. "This speaks about the quality of the quotation and the confidence of the international investors in China", Manager of Merrill Lynch Damian Chunilal, who drew the ICBC shares, said.

Before the Japanese portable radio operator NTT DoCoMo had held the "record", this company delivered about $18.4 billion at its stock exchange course in 1998. As number five of the world largest credit institutes, the ICBC with its evaluation of about $146 billion is now in an order of magnitude, for example, of JPMorgan & Chase. But the ICBC misses however still $100 billion to be on equal terms with the Citigroup and the Bank of America (the most evaluated money houses of the stock market industry).

???The investors count on annual growth rates of the Chinese economy to 10 per cent before the Olympic Games in 2008 in Peking", K.C.Chan from the International Investment company KDB said. "Therefore they buy now Chinese shares to participate on this growth." So the ICBC investors are to be considered with dividends from 45 to 60 per cent of the net profit in the coming two years.

The hitherto to the Hong Kong stock exchange brought Chinese banks also generate clear course increases. At present, the Bank of Communications acts 137 per cent over their issue price, the Chinese Construction bank acts 53 per cent and the Bank of China acts 14 per cent more highly.

In 2005 China began to bring its credit institutes to the international stock markets. The government in Peking wants the banks to make more competitive for the stronger opening of the international competition's sector. Only the ICBC received a capital syringe of $15 billion in April 2005. The government put 1 billion dollars into the "large four" most important national banks to relieve the institutes from putrid credits.

At present, 95 per cent of the ICBC shares which are placed in Hong Kong are reserved for institutional investors. If the demand of the private investors fails similarly strongly, the interest could be gone back still to 80 per cent. In view of the large interest among institutional investors the demand might be high also with the small investment. The ICBC is presented to meaningful investors in Singapore and London in these days.

However, while institutional investors pay only for the shares which they keep actually, small investors must pay in advance for their total appointment in Hong Kong. They receive the money for the interest, which were not assigned to them, back only after the execution of their appointment.

The situation in the Asiatic area is difficult. Also in Shanghai investment experts count that the ICBC breaks all records. The expenditure volume of the common shares will fail more highly than twice as in the past peak value (by the way, the Bank of China set up $2,5 billion into the peak value only in this year).

According to the informed source, however, that the demand in Shanghai is to foment more difficult because there the market has little experience with stock exchange courses in such order of magnitude. It was always clear that it would become difficult in Shanghai.

There is also another sceptical thing about investments in China. One person who knows this situation said Reuters that the ICBC wanted to pay 2,5 per cent of the emission volume at fees. The fees would correspond to more than 10 per cent of the $3.24 billion which the investment banks collected with capital market transactions in the Asiatic area without consideration of Japan so far in this year.


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