Wall Street is undergoing a reshuffling, and assets are on the table for financial firms of other counties to pick up. Japan-based Mitsubishi UFJ and Nomura Securities have already made moves. Will cash-laden Chinese financial institutions follow them in?
PDF
1 comment:
Rich with Cash but Short of Talent, Chinese Bankers Eying Wall Street
25 September 2008
Wall Street is undergoing a reshuffling, and assets are on the table for financial firms of other counties to pick up. Japan-based Mitsubishi UFJ and Nomura Securities have already made moves. Will cash-laden Chinese financial institutions follow them in?
Perhaps not, at least for the moment. At present, most Chinese analysts say it is “still too early” to acquire Wall Street assets with the whole US financial system still a-roil and the Treasury and the Fed also having difficulties getting Congress to approve a $700 billion bailout plan.
A deeper reason is that Chinese banks do not feel fully capable of handling the risks in acquiring and digesting a large overseas financial firm. Big acquisitions, they are afraid, made without qualified risk management capability, reorganization capability, and just plain talent, can lead to big losses even at bargain basement prices.
That is a concern shared by Deloitte’s Wu Songhan. “If they want to fully acquire a large investment bank, they have to calculate whether they are able to manage such a complicated financial firm.”
Eddie Wang, president of China Minsheng Bank, who worked for HSBC for many years and has rich experience in overseas acquisitions, thinks Chinese banks cannot become globalized simply by “acquiring overseas.” “Buying a bank is not just buying something at a cheap price. They need to learn from it, and make it localized.”
The big Japanese institutions have accumulated richer experience in overseas investment, successful or not, as they, or their various parts as they were then, were predators during the 1980s. Chinese banks have only started intensive overseas investment during the past one or two years.
Most Chinese banks think conservatively, believing it will only be safe to enter Wall Street on condition of the US government’s approval of its $700 billion bailout plan and clear solutions to the problems of the big financial firms. They see no advantages now on Wall Street except for low prices and a whole market that is weak and lacking powerful support.
Moreover, Chinese banks are waiting for the next round of sales of financial firms. Other companies, including European ones, have assets they will want to unload and that are not yet on the market.
Some, though, are more active-minded. Tang Shuangning, Chairman of China Everbright Group, believes under that current circumstances banks can buy assets on Wall Street if they have confidence in their investment ability. Jiang Jianqing, chairman of the Industrial and Commercial Bank of China (ICBC), has also said that once they found opportunities for overseas investment, they would fully evaluate them to see if they meet the bank’s strategy.
Holding percentages for Chinese banks in acquiring stakes in overseas financial firms, and whether they can gain the right to control and manage them, is still a problem. Jiang Jianqing emphasized ICBC is looking to be a strategic investor, and not merely a financial investor, in its overseas investment.
Post a Comment