atans1

Temasek’s right on ICBC, BoC & CCB

In Banks, China, Temasek on 07/11/2013 at 4:52 am

I’ve blogged before that Temasek loves China banks while ang mohs were running away.

Well since late June, Chinese bank shares have been on a roll, example  ICBC (where Temasek had been picking up shares this yr) is up more than 22%. Recent Chinese economic data has got investors buying the banks again, ang mohs included. So much so that some smaller Chinese banks are planning IPOs in HK.

Anyway,Jack, the usual suspects, and the readers of TRE, TOC and TRS needn’t yet bang their [ ] in frustration. Firstly, Temasek can never ever exit these investments given that S’pore wants to be China’s friend. Temasek got big chunks of BoC and CCB at a “special” price.. It can only play around the margins, reducing its cost of these investments.

Then are there two more reasons why we should be worried about Temasek’s punt:-

The biggest threat to Chinese banks’ cozy oligopoly … Online groups Alibaba and Tencent are making incursions into the country’s financial services market, providing an alternative to the capped deposit rates and sluggish service offered by the country’s big lenders. The disruptors are taking on risks, and savers should be glad. http://blogs.reuters.com/breakingviews/2013/10/10/tech-disruptors-could-save-chinas-savers/

Alibaba, the e-commerce group that just bought a 51 percent stake in asset manager Tianhong for $193 million, is the banks’ main foe. By July it had made over $16 billion in short-term loans to companies who sell goods on its sites. Its real-time records of borrowers’ cashflows and counterparties aid lending decisions.

Banks’ deposits are also under threat. WeChat, the mobile chat app that clocked up over 300 million users within two years of being launched by gaming group Tencent, is working on distributing wealth products via smartphones, and offering payment for fund managers, according to Chinese media. Alibaba lets users reinvest surplus balances in their online payment accounts into money market funds. That gives savers a better return than the 3 percent capped rate they get on bank deposits.

Tech companies’ desire to disrupt the financial services sector is understandable. China’s big banks make returns on equity in excess of 20 percent.

Add to that, an attempt to shake up the country’s slow-moving financial industry and create more investment opportunities for the private sector, Chinese regulators have invited companies from across the spectrum to apply for banking licences.
And here’s the latest on bad debt write-offs (something I had talked about) http://www.bloomberg.com/news/2013-10-22/biggest-china-banks-triple-debt-write-offs-to-brace-for-defaults.html.
So Jack, etc can relax. Time enough for their curses on Ho Ching to take effect. I hope they remember that returns from the reserves are used to make life more comfortable for ourselves.
  1. Thank you,Jack is not frustrated,happy that I know not what you know,I hope the other usual suspects,will not be frustrated too,anyway,the explosion will definitely before 31 Dec 2014,I do not know the exact date.Pray that the elites of Temasek will not be too excited with your news and take good card of our coffin money.Thank you.

      • China plans to prove the sceptics wrong
        http://www.ft.com/intl/cms/s/0/e8ca48ec-42ea-11e3-8350-00144feabdc0.html?siteedition=intl#axzz2jq04gtVT
        Dr. Milo Jones | November 4 12:23pm |
        I submit it would be a mistake to overestimate both the zeal and the skill of China’s new leaders to root out corruption involving their own family members, undermine short-term political support by taking on established vested interests among their power base, or undertake any economic or financial reform likely to weaken the political, social and economic control of the Communist Party.
        China’s leaders are riding a series of dragons (every province is Greece when it comes to bad loans, and the demographic outlook is disastrous) and continued rule of the Party, not the long-term welfare of the Chinese people, is at the heart of their concerns. The CCP will undertake just enough reform to keep the show on the road for them and their cronies: any spillover benefits for Chinese citizens or foreign businesses are entirely coincidental.
        Speculators can make money in China, but I would submit that “investing” in a place with neither rule of law nor the ability to actually own something is an oxymoron.
        The best guide to the coming plenum is to watch re-runs of The Sopranos – backroom deals, naked ambition and the occasional brutal deed will lie behind the curtain, however much China’s leaders smile for the cameras and speechify.
        Thank you.

  2. Response from FT Chinese readers who are on the ground there – please pray.
    中国能再次证伪质疑吗?
    http://www.ftchinese.com/story/001053285

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