Manhattan in the making

[Ian_Lee]

Do any readers notice that the recent IPO of China Construction Bank in HKSE is the largest IPO in the world this year?

The amount of IPO is US$8 billion -- even larger than the market capitalization of its underwriter Morgan Stanley.

Moreover, the first trading day was during the low ebb of HK market when the Hang Seng Index receded by an accumulating 1,000 points consecutively for days.

However, the debut trading was extremely normal which showed that the HK market has an unfathomable depth.

Now all the Mainland SOEs and private enterprises have lost interests in listing in the Shanghai and Shenzhen bourses and queued up in HK. After the listings of Bank of Communication and China Construction Bank this year, the remainders of the four big banks will be listed in HK soon.

The most difficult task of China's economic reform -- banking sector -- will be solved via listing in HK. And the foreign investors now also place big confidence in that reform.

Other than the Mainland enterprises, Taiwan's big conglomerates are also giving up the Taiwan bourse and lining to list in HK too.

Now some experts predict that the HK bourse will exceed Tokyo's in merely 10 years and becomes second only to NYSE! (Well,.....the forced closure of Tokyo Exchange today doesn't help its image.)

Well, as a rule of thumb,.....those instruments of transfer of the same Mainland Companies that are printed in traditional script (those listed in HK bourse) are more valuable and universally acceptable than those printed in simplified script (narrowly circulated as A shares in Shanghai & Shenzhen bourses).

So don't get mixed up with the scripts even though the share certificates look almost alike:roll:

[Outofin]

I did. It was hard to ignore the big news.

Just one year ago, people didn't believe the bad loans of Big Four could ever be resolved, let alone an imminent IPO. Because I'm short of knowledge on this, I couldn't figure out the tricks in the reforms on China's financial sector. Correct me if I'm wrong. To me, it seems everything is resolved solely by the money from central bank PBC. Where does PBC's money come from? Printed. But printing money has to take the risk of inflation, fortunately, which is very unlikely to happen in the current circumstance.

[bhchao]

Just one year ago, people didn't believe the bad loans of Big Four could ever be resolved, let alone an imminent IPO.

Just curious, what is the Big Four?

[Outofin]

Big Four 四大国有银行：中国工商银行，中国建设银行，中国农业银行，中国银行。

They're designed to work in different areas, which you can see from their names. Industrial and Commercial Bank of China is also targeting IPO in HK. Agricultral Bank of China is the worst and most desperate one. Bank of China, you should know it by looking at HK's cityscape, or playing Simcity 3000.

[Outofin]

Found a joke making fun of the banks. How to explain their names, in pinyin and Chinese. Very funny!

中国建设银行——CBC(ConstructionBankofChina)——“存不存？” (Cun Bu Cun?)

中国银行　　——BC(BankofChina)——“不存” (Bu Cun)

中国农业银行——ABC(AgricultureBankofChina)——“俺不存”

中国工商银行——ICBC(IndustryandCommercialBankofChina)——“爱存不存”

民生银行　　——CMSB！(chinaminshengbank)——“存吗？傻比”

招商银行　　——CMBC——“存吗？白痴！”

兴业银行　　——CIB——“存一百”

国家开发银行——CDB(CHINADEVELOPMENTBANK)——存点吧！”

北京市商业银行——BCCB(BEIJINGCITYCOMMERCIALBANK)——“白存存不？”

汇丰银行　　——(HSBC)“还是不存”

[skylee]

匯豐也不存?

[39degN]

it seems everything is resolved solely by the money from central bank PBC. Where does PBC's money come from? Printed. But printing money has to take the risk of inflation, fortunately, which is very unlikely to happen in the current circumstance.

No, the money spent in this is all US dollars from China's foreign currency reserve, by August of this year, China's FCR exceeded US$753.2 billion, ranking No 2 in the world just behind japan(crazy, isnt it?). Anyway, its better to spend some meaningfully than to wait for shrinking considering US dollars unpredictable future!

[Celso Pin]

and part of these billions (with B) are in american treasure bonds... what a bargain power china have... what if china, like other countries did, "diversify" part of the the reserves... with euro and yen... for instance... think about 300 billion dollars in the market... it will be worst for us then a nuke in NY...

[Outofin]

No, the money spent in this is all US dollars from China's foreign currency reserve

Some made money, some printed money, I guess.

1998年，财政部发行特别国债，向四大行注资2700亿元充实资本金；1999年，成立四大资产管理公司，专门处理国有商业银行的不良资产问题，但收效不佳；2004年1月6日，中国人民银行决定将450亿美元的外汇储备分别注入到中国银行和建行。

90年代中期至今，为关闭清理各类金融机构以及国有商业银行改革，中国人民银行已经发放了约1.4万亿元央行再贷款。央行再贷款属于基础货币投放。

[bhchao]

The NYTimes featured this story on today's IPO pricing for Industrial and Commercial Bank in Hong Kong. http://www.nytimes.com/2006/10/20/business/worldbusiness/20ipo.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1161317218-UZ/fQI850GXbHIpDl6PwOw

In a reflection of China’s growing prominence in international finance, Hong Kong is set for a banner year in global markets: More money will be raised by companies selling shares to the public here than on the biggest exchanges in New York and London.

And on Friday, pricing will be set for the world’s largest offering ever, that of China’s biggest bank, Industrial and Commercial Bank of China.

This week, long lines of individual investors showed up at downtown stalls to grab prospectuses for the bank’s initial public offering, while institutional investors have swamped the underwriters with orders.

The offering, scheduled for Oct. 27, is expected to raise $16 billion in Hong Kong. And in a twist from conventional offerings, the company will also raise about $6 billion in Shanghai that day. Because of its size, this deal, and a $10 billion initial public offering by the Bank of China in June, will account for more than half of Hong Kong’s volume this year. But can Hong Kong hold onto its lead next year? Investment bankers doubt it and Hong Kong’s fame may be short-lived....

A lingering question now for investment bankers is whether investors’ appetite for Chinese stocks will flag after many have stuffed their portfolios with Chinese bank stocks over the last year.

After its initial public offering, the market capitalization of the Industrial and Commercial Bank of China and the Bank of China is likely to play a sizable role in stock indexes for Asia and especially for Hong Kong.

As a result, Romeo Dator, the portfolio manager of the $75 million United States Global China Region Opportunity Fund in San Antonio, said he and many other investment managers had little choice but to buy shares in the big Chinese banks to insure that their results did not diverge too widely from the overall indexes....

[Ian_Lee]

Now Hong Kong has realized Chairman Mao's dream -- 超英趕美!

[randall_flagg]

and part of these billions (with B) are in american treasure bonds... what a bargain power china have... what if china, like other countries did, "diversify" part of the the reserves... with euro and yen... for instance... think about 300 billion dollars in the market... it will be worst for us then a nuke in NY...

Not necessarily. The US economy, with the dollar being somewhat of a world currency, might even profit from that. Why? Two reasons. Reason number one is a reason that all countries have in common, reason number two basically only applies to the US. Reason number one is simply that the dollar would depreciate – very, very fast. This would boost US exports, right? OK, reason number two is a little better: Think about what would happen if the dollar kept dropping? Say by up to 50%. The US would have 50% less debt in China and all other countries in the world! So if Chinese decides to drop billions worth of dollars on the market, they know that their own reserves will be devalued in no time.

[Ian_Lee]

Randall:

If the greenback depreciates very very fast, then it will not serve its role as the world's principal reserve any more. Most central banks will try to liquidate their dollar holdings and stampede on each other.

What happened to sterling will be repeated on greenback if there is such loss of confidence. Sterling, which served as world's reserve until as late as 1960s, was stampeded and rocked bottom in early 1980s with interest rate skyrocketing to all time high.

Can US economy sustain through such scenario?

[Ian_Lee]

Now even NYC mayor Bloomberg worries that NYC's global financial status will be replaced by London and Hong Kong:

http://business.guardian.co.uk/story/0,,1936527,00.html

[bhchao]

Chicago's financial center is also growing. This article says that competition between New York and London will become more intense in 2007, while Hong Kong will take third place because the total value of its IPOs in 2006 was monopolized by two huge banks.

http://www.nytimes.com/2006/10/27/business/worldbusiness/27london.html?_r=3&oref=slogin&oref=slogin&oref=slogin

[mind_wander]

In my opinion, every country in the world, still accepts USD. However, if the USD depreciates, then most countries would grab the chance and buy USD at a cheaper price, ineffect would bring back the value of the dollar. Also, the cost of living would be cheaper, if the USD does depreciates; it can go either way: good or bad.

[bhchao]

Last month's article in the NYTimes on the duel between Hong Kong and Shanghai for financial capital of China. It tells how Hong Kong's financial prestige in China is likely to becoming the equivalent of New York, while Shanghai will more resemble Chicago's status.

Hong Kong seems to be benefiting from the corruption scandal in Shanghai, but Shanghai still has many allies in Beijing.

http://www.nytimes.com/2007/01/16/business/worldbusiness/16hong.html?ex=1171604704&en=f14c524bf713452a&ei=5102&partner=vault