Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Categorized | Capital Markets

Chinese banks hit Hong Kong IPO hitch

Posted on June 30, 2013

China’s banks have been dealt a further blow as falling share prices put on ice a number of potential new Hong Kong listings.

Several smaller Chinese commercial lenders had been planning Hong Kong stock market debuts this year or early next year, including Bank of Shanghai, Guangfa Bank, and Bank of Chongqing.

    However, little known regulations on bank capital raising, set by Chinese regulators, prevent mainland banks from raising funds in the equity markets at a price that values the company at a price-to-book ratio below one, an indication that investors do not believe the stated worth of a company’s assets.

    With almost all similar midsized banks trading well below that level after the recent rout in Chinese shares, new issuers are now likely to find themselves locked out of the market, according to people with knowledge of the listing rules.

    Investor confidence in China has been severely knocked by the recent liquidity crunch on the mainland, during which interbank lending rates spiked to record highs of more than 25 per cent at one point. Growth downgrades and concerns that government efforts to tighten credit conditions will hit company earnings have also had an impact, as has the global retreat from emerging markets.

    The pricing issue also raises doubts about whether China Everbright Bank can proceed with its already twice-delayed Hong Kong listing.

    Last week the Shanghai Composite fell below 2,000 points for the first time since December, hitting a 4½-year low and slipping into bear market territory in the process. On just one day – last Monday – the index fell 5.3 per cent. Financials have been among the worst hit, especially those reliant on the wholesale markets for funding.

    China Minsheng Bank has lost 24 per cent in Hong Kong in the past month alone, while on the mainland, Shanghai Pudong Development Bank has shed 22 per cent.

    The sell-off in Chinese shares has already had an impact on the new listing market in Hong Kong. Casino operator Macau Legend first postponed, then downsized its initial public offering, while a number of others have put their deals on hold.

    Meanwhile the IPO market in Shanghai has yet to reopen from what was, in effect, a shutdown that began last year, as regulators have sought to clear a waiting list of nearly 900 companies.

    Some analysts have attributed the poor performance of the Chinese market to fears that a flood of new issues would sap liquidity from the rest of the market.

    Authorities have also issued new rules to improve the listing process, which had raised hopes that the market would soon reopen.

    However, the recent volatility has cast fresh doubt on whether regulators are ready to give companies the go-ahead to raise new funds on the mainland.