Banks

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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Economy

Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

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Currencies

Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Banks

Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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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.