Cinda shares soar 26% on HK debut
Shares of China Cinda Asset Management Co Ltd soared more than one-quarter in their first trading day, after becoming Hong Kong’s biggest IPO so far this year by raising $2.5 billion.
Beijing-based Cinda, the first of the nation’s four State-owned bad loan managers to go public, saw its shares close 25.69 percent higher at HK$4.50 (58 cents) on Thursday. The benchmark Hang Seng Index slid 0.51 percent to 23,218 points.
The shares opened at HK$4.30, 20 percent above the IPO price. Nomura Securities Co Ltd rated Cinda a “buy” and set a target price of HK$5.10.
The Chinese authorities created Cinda in 1999 as one of four asset management companies that were designated to soak up bad loans from China’s State-owned banks. After unloading the bad loans, the banks flourished, and most of them later went public.
Analysts said that Cinda’s move to raise funds was part of its preparations to buy more distressed assets from State-owned lenders. Continued interest rate liberalization in the Chinese mainland will stimulate competition and perhaps drive up bad loan levels.
Moreover, many of the loans extended in response to the $4 trillion stimulus in 2009 have soured, although they’re still on the lenders’ balance sheets.
Cinda sold 5.3 billion shares in its IPO, a 15 percent stake, and raised $2.5 billion at the high end of a HK$3 to HK$3.58 offering price range. The initial allocation for individual investors in Hong Kong was oversubscribed
Chinese banks have a strong need to shed bad assets as they are transforming their business model.” RESEARCH NOTE ON CINDA BY HONG KONG-BASED CHIEF SECURITIES LTD
Cinda’s trading volume was HK$2.5 billion on Thursday, compared with the Hong Kong exchange’s daily average of HK$63.1 billion in the first 11 months of the year.
Investors bet that Cinda will have more business opportunities as China reforms its financial industry, part of a broader plan to raise the quality of China’s economic growth.
“Chinese banks have a strong need to shed bad assets as they are transforming their business model,” Hong Kong-based Chief Securities Ltd wrote in a research note on Cinda.
Chinese banks’ bad loan ratio was 0.97 percent at the end of the third quarter this year, up from 0.9 percent at the end of the third quarter in 2011.
In its prospectus, Cinda said that 60 percent of the IPO proceeds will be used to improve bad asset management.
Another 20 percent will be used in its financial investment and asset management businesses.
The remainder will be spent on recapitalizing its financial subsidiaries, which operate in the securities, trust, leasing and insurance sectors.
China Cinda Asset Management Chairman Hou Jianhang, right, and Jintian Pharmaceutical Group Chairman Jin Dongtao celebrate at Cinda’s listing ceremony at the Hong Kong stock exchange on Thursday. The Chinese bad-debt management company’s shares soared on their debut.