Cinda shares soar 26% on de­but

China Daily (Hong Kong) - - BUSINESS COMPANIES - By GAO CHANGXIN in Shang­hai gaochangxin@chi­nadaily.com.cn

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

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

in­vestors in Hong Kong was over­sub­scribed 160 times.

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.

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