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Monday, 30 November 2009
Minsheng Down in Debut as China Banks Under Pressure
Shares of China Minsheng Banking, which raised $3.9 billion in the world’s fifth largest initial public offering of 2009, fell 1 percent in their Hong Kong trading debut, underscoring the recently soured investor sentiment for mainland banks.
Minsheng Down in Debut as China Banks Under Pressure
Reuters 25 November 2009
Shares of China Minsheng Banking, which raised $3.9 billion in the world’s fifth largest initial public offering of 2009, fell 1 percent in their Hong Kong trading debut, underscoring the recently soured investor sentiment for mainland banks.
Minsheng’s shares traded at HK$9.02 at mid-day, compared with their IPO price of HK$9.08, which was about the mid-point of its indicated range of HK$8.50-HK$9.50. Hong Kong’s benchmark Hang Seng Index fell 0.44 percent.
Recent high IPO volume in Hong Kong as well as reports of Chinese banks engaging in fundraising talks pressured the debut of Minsheng Bank, China’s seventh-largest listed bank, said Chen Xingyu, an analyst at Phillip Securities Research in Shanghai.
“Considering the number of IPOs in recent weeks, Minsheng would become less attractive to investors in terms of pricing as there are a number of choices in the market,” Chen said.
“The proceeds from the IPO would have a positive impact on the bank’s capital adequacy ratio and cash flow over the short term,” he added.
Chinese banking stocks have come under pressure recently on concerns of potential cash calls by the sector on expectations the government may hike larger state lenders’ capital adequacy ratios or reserve requirements next year after a lending boom.
Minsheng’s capital adequacy ratio is rising to 12 percent after the Hong Kong IPO from 8.57 percent as of the end of September, the bank said earlier.
Minsheng, already listed in Shanghai, was China’s first non-state lender to list in Hong Kong. The government or state-owned enterprises are the controlling shareholders for most of China’s listed banks, but Minsheng has almost no government holding.
Minsheng’s Shanghai stock traded at 8.2 yuan ($1.2), about 1.5 percent lower from its closing price on Wednesday.
Minsheng, which became the seventh mainland bank listed in Hong Kong, sold 3.32 billion shares, or 15 percent of its enlarged share capital, and plans to use its IPO proceeds to strengthen its capital base and grow its business.
IPO Price
Minsheng priced its shares at 1.7 times forecast book value for 2010. By comparison, Bank of Communications, China’s No. 5 lender, traded at about 2.17 times 2010 book value, while China Merchants Bank and CITIC Bank traded at 2.75 times and 1.66 times book value, respectively, according to a UBS research report.
The Hong Kong retail tranche was about 159 times subscribed. The popularity triggered the clawback option, raising the retail portion to 20 percent from 5 percent of total offering.
Investors were attracted to Minsheng Bank as a way of tapping China’s surging economic growth, and a roster of investors also boosted confidence.
Billionaire investor George Soros, Tiger Fund, Temasek and China Life Insurance committed to buying Minsheng’s shares from the institutional portion of its IPO, sources said earlier.
However, Hopu Investment Management, a highly influential China-focused private equity fund, decided to pull out of plans to invest up to $1 billion in Minsheng at the eleventh hour due to concerns the price was too high, sources told Reuters.
Minsheng Bank operates 29 branches and 387 sub-branches domestically, with total assets at the end of September of 1,403 billion yuan ($205 billion).
The mid-sized lender forecasts 2009 net earnings will jump at least 39 percent to 11 billion.
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Minsheng Down in Debut as China Banks Under Pressure
Reuters
25 November 2009
Shares of China Minsheng Banking, which raised $3.9 billion in the world’s fifth largest initial public offering of 2009, fell 1 percent in their Hong Kong trading debut, underscoring the recently soured investor sentiment for mainland banks.
Minsheng’s shares traded at HK$9.02 at mid-day, compared with their IPO price of HK$9.08, which was about the mid-point of its indicated range of HK$8.50-HK$9.50. Hong Kong’s benchmark Hang Seng Index fell 0.44 percent.
Recent high IPO volume in Hong Kong as well as reports of Chinese banks engaging in fundraising talks pressured the debut of Minsheng Bank, China’s seventh-largest listed bank, said Chen Xingyu, an analyst at Phillip Securities Research in Shanghai.
“Considering the number of IPOs in recent weeks, Minsheng would become less attractive to investors in terms of pricing as there are a number of choices in the market,” Chen said.
“The proceeds from the IPO would have a positive impact on the bank’s capital adequacy ratio and cash flow over the short term,” he added.
Chinese banking stocks have come under pressure recently on concerns of potential cash calls by the sector on expectations the government may hike larger state lenders’ capital adequacy ratios or reserve requirements next year after a lending boom.
Minsheng’s capital adequacy ratio is rising to 12 percent after the Hong Kong IPO from 8.57 percent as of the end of September, the bank said earlier.
Minsheng, already listed in Shanghai, was China’s first non-state lender to list in Hong Kong. The government or state-owned enterprises are the controlling shareholders for most of China’s listed banks, but Minsheng has almost no government holding.
Minsheng’s Shanghai stock traded at 8.2 yuan ($1.2), about 1.5 percent lower from its closing price on Wednesday.
Minsheng, which became the seventh mainland bank listed in Hong Kong, sold 3.32 billion shares, or 15 percent of its enlarged share capital, and plans to use its IPO proceeds to strengthen its capital base and grow its business.
IPO Price
Minsheng priced its shares at 1.7 times forecast book value for 2010. By comparison, Bank of Communications, China’s No. 5 lender, traded at about 2.17 times 2010 book value, while China Merchants Bank and CITIC Bank traded at 2.75 times and 1.66 times book value, respectively, according to a UBS research report.
The Hong Kong retail tranche was about 159 times subscribed. The popularity triggered the clawback option, raising the retail portion to 20 percent from 5 percent of total offering.
Investors were attracted to Minsheng Bank as a way of tapping China’s surging economic growth, and a roster of investors also boosted confidence.
Billionaire investor George Soros, Tiger Fund, Temasek and China Life Insurance committed to buying Minsheng’s shares from the institutional portion of its IPO, sources said earlier.
However, Hopu Investment Management, a highly influential China-focused private equity fund, decided to pull out of plans to invest up to $1 billion in Minsheng at the eleventh hour due to concerns the price was too high, sources told Reuters.
Minsheng Bank operates 29 branches and 387 sub-branches domestically, with total assets at the end of September of 1,403 billion yuan ($205 billion).
The mid-sized lender forecasts 2009 net earnings will jump at least 39 percent to 11 billion.
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