The third-largest sale of new stock to the public this year is a Chinese bank that has more than double the proportion of bad loans its peers do and was investigated for money-laundering at a predecessor last year.
Investors lined up to buy.
The US$2.8-billion initial public offering of the state-run Bank of China's (
The lure: a bank whose parent has 100 million depositors and 13,000 branches in a home market. China, with 1.3 billion people and an economic growth rate of 8 percent, is opening its markets after joining the WTO. Investors say those reasons are as important -- or more important -- than the bank.
"Imagine you were overnight given access to the world's largest market, filled with people who get richer daily," said Henry Lee, managing director of Hendale Asia Fund Ltd, an alternative investment fund. "People are buying into China."
The sale's arrangers promoted the first-time share sale with meetings in such cities as Hong Kong, New York, Boston, London, Milan and Frankfurt. In Japan, the sale also was pitched with full-page newspaper advertisements.
The global portion of the deal drew at least five times more orders in Asia than in Europe and the US, a banker involved in the transaction said.
"It's a restructuring story and if you like those kinds of stories, then that's great," said Edward Allinson, manager of the US$50 million Dreyfus Founders International Fund in Boston. "I have enough of those. I don't need to buy into another one."
Asian companies, many of which are customers of the Hong Kong unit's parent and plan to expand in China as it opens to foreign competition, ordered billions of dollars of stock.
Standard Chartered Plc, a UK bank whose business is mostly in Asia, agreed to buy US$50 million in shares, sale documents said.
Hutchison Whampoa Ltd (
Shanghai Industrial Holdings Ltd's (上海實業控股) spokesman Derek Fung said the company plans to buy some BOC shares partly because "it's our leading principal banker," adding that the investment is expected to provide a "decent return."
Fund managers, for their part, are willing to buy only at the lower end of the range, marketed at HK$6.93 to HK$9.50. Twelve Asia-based investors, who manage more than US$14 billion and plan to buy shares, said they would pay an average of HK$7.87 a share.
BOC Hong Kong, formed in October by the merger of the Hong Kong and Macau businesses of Bank of China, had a non-performing loan ratio of about 9 percent at the end of last year. That's almost twice the 4.7 percent average for Hong Kong banks.
The economy barely grew last year; the bank's write-offs for loans increased to HK$1.2 billion (US$153 million) in 2001 from HK$322 million in 1999. Cleaning up bad loans caused the Hong Kong unit's 2001 net income to fall 47 percent. It shifted HK$11.4 billion of loans into a special purpose vehicle, BOC Cayman.
In January, Bank of China paid a fine of US$20 million to regulators in China and the US for making preferential loans, issuing fraudulent letters of credit and other infractions of US and Chinese rules.
In 2001, the bank discovered that three managers at the Kaiping sub-branch had embezzled about US$500 million over the previous eight years, according to the sale prospectus.
"There are big problems with all the Chinese banks," said Scott McGlashan, who helps manages US$150 million for Jade Absolute Fund Managers in the UK. "Investors are deceiving themselves if they believe the Hong Kong units of these banks will not be affected."
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by