HONG KONG — Shares in the state-run ‘‘bad bank’’ China Cinda Asset Management rose as much as 33 percent on their trading debut in Hong Kong on Thursday after the bank raised around $2.5 billion last week on huge demand for its initial public offering.
The share price rose as high as 4.79 Hong Kong dollars in morning trading, a third above its offering price of 3.58 dollars.
On paper, the increase added around 43 billion dollars, or about $5.5 billion, to China Cinda’s market value, based on its total share capital of 35.5 billion shares.
The strong performance signals resurgent demand among investors in Chinese I.P.O.’s, and is likely to bode well for China Everbright Bank, which is scheduled to price its offering on Friday as it attempts to raise as much as $2.8 billion in what would be the biggest Hong Kong share sale this year.
Cinda and Everbright are opposites. Everbright makes most of its money from interest margins on traditional lending, which accounts for around 77 percent of its operating income.
Business is best when times are good, when companies and people are borrowing more and are flush with cash to repay their debts. Cinda, on the other hand, is one of four asset managers set up by the government to bail out banks by taking bad loans off of their books.
When borrowers fail to repay their loans to banks like Everbright, Cinda makes money by acquiring those debts at a discount and recouping its outlay by extracting cash, shares or other assets from the borrowers.
In effect, the Cinda I.P.O. represents a bet that a slowdown of the Chinese economy will create a new wave of bad debt. So far, investors seem keen on both deals.
Demand among individual local investors in Cinda’s offering was 160 times the amount of shares that had been set aside for them. Everbright’s I.P.O. is its third try for a Hong Kong listing.The bank aborted two previous attempts — most recently in August 2012 — because of market downturns.
Everbright Bank is the third Chinese bank since October to seek a Hong Kong listing.Chinese banks have seen generally healthy profit growth, but they need to raise money and secure new access to capital markets ahead of what analysts expect could be a rising tide of new bad debt in China.
The banks also need to shore up their capital bases ahead of more stringent capital requirements being phased in by Chinese financial regulators through 2018.
nytimes.com
The share price rose as high as 4.79 Hong Kong dollars in morning trading, a third above its offering price of 3.58 dollars.
On paper, the increase added around 43 billion dollars, or about $5.5 billion, to China Cinda’s market value, based on its total share capital of 35.5 billion shares.
The strong performance signals resurgent demand among investors in Chinese I.P.O.’s, and is likely to bode well for China Everbright Bank, which is scheduled to price its offering on Friday as it attempts to raise as much as $2.8 billion in what would be the biggest Hong Kong share sale this year.
Cinda and Everbright are opposites. Everbright makes most of its money from interest margins on traditional lending, which accounts for around 77 percent of its operating income.
Business is best when times are good, when companies and people are borrowing more and are flush with cash to repay their debts. Cinda, on the other hand, is one of four asset managers set up by the government to bail out banks by taking bad loans off of their books.
When borrowers fail to repay their loans to banks like Everbright, Cinda makes money by acquiring those debts at a discount and recouping its outlay by extracting cash, shares or other assets from the borrowers.
In effect, the Cinda I.P.O. represents a bet that a slowdown of the Chinese economy will create a new wave of bad debt. So far, investors seem keen on both deals.
Demand among individual local investors in Cinda’s offering was 160 times the amount of shares that had been set aside for them. Everbright’s I.P.O. is its third try for a Hong Kong listing.The bank aborted two previous attempts — most recently in August 2012 — because of market downturns.
Everbright Bank is the third Chinese bank since October to seek a Hong Kong listing.Chinese banks have seen generally healthy profit growth, but they need to raise money and secure new access to capital markets ahead of what analysts expect could be a rising tide of new bad debt in China.
The banks also need to shore up their capital bases ahead of more stringent capital requirements being phased in by Chinese financial regulators through 2018.
nytimes.com
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