DEALTALK-China banks race for funds on investor fatigue fears

(For more Reuters DEALTALKs, click [DEALTALK/])

* China banks seen asking for $60 bln or more in cash call

* Big banks seen taking first dip at the investor well

* Concerns linger over investor fatigue

By Kennix Chim and Michael Wei

HONG KONG/BEIJING, May 3 (BestGrowthStock) – The ongoing round of
fund-raising by China’s top banks is turning into a dash for
cash, with industry heavyweights muscling to be first in line
amid worries that markets could quickly tire of China’s needy

The multibillion-dollar cash call took on a new urgency
over the weekend, when China’s regulator announced its latest
monetary tightening measure by raising reserve requirement
ratios for banks. [ID:nSGE64200J]

Chinese banks could collectively request $60 billion or
more from investors in Hong Kong and Shanghai, seriously
testing their appetite for providing new funds to a group that
doled out a record $1.4 trillion in new loans last year under
Beijing’s loose-money policies during the financial crisis.

Titans like ICBC (1398.HK: ) and China Construction Bank
(0939.HK: ), the world’s two largest banks by market cap, along
with Agricultural Bank of China [ABC.UL], China’s No.4 lender,
are likely to get the first dips at the well in the looming
fund-raising tsunami, said banking and other industry sources.

“As the first priority, Beijing wants AgBank to be the
first among all to tap the capital market, because the number
of investors that would want to put money into Chinese banks is
limited,” said one investment banker working on that deal, who
was not authorised to speak about it publicly.


For StarMine comparative data,

To view a graphic on China banks’ announced fund-raising

plans, click on:


Sources have said that AgBank, the last of China’s major
banks to go public, could make its IPO as soon as July and
raise up to $30 billion, which would make it the world’s
largest such offering on record.

AgBank plans to submit its IPO application to the Hong Kong
stock exchange this week, as some of its underwriters hold
meetings to try and line up cornerstone investors, banking
sources told Reuters on Monday. [ID:nTOE64201U]


While AgBank appeared to have the pole position in the
upcoming feeding frenzy with the sudden acceleration of its IPO
plans last month, ICBC (601398.SS: ) may have trumped its smaller
rival with plans to launch its bid to raise up to $11.7 billion
this week through a placement of shares in Hong Kong, sources
said. [ID:nTOE63T08R]

CCB (601939.SS: ) threw its own hat into the ring last week
as well when its board approved a plan to raise up to $11

Under its plan, CCB said it would issue new shares roughly
equal to about 7 percent of its Hong Kong and Shanghai share
counts, adding up to 630 million new Shanghai-listed A shares
and 15 billion new Hong Kong-listed H-shares.

All three banks, along with other majors like Bank of China
(601988.SS: )(3988.HK: ), Bank of Communications (3328.HK: ) and
CITIC Bank (601998.SS: )(0998.HK: ), are believed to be lobbying
heavily behind the scenes for a first crack at the markets.

“Banks’ fundraising plans reflect the will of the State
Council, and should be the result of coordination between
various regulatory bodies,” said Wu Songkai, analyst at Huati
United Securities.

The sudden dash for cash is being driven by Beijing’s
broader concern that the current window for fund raising could
close by the fall, said one banking source, who was not
authorised to talk publicly about the deal.

But the rush to market could also backfire if investors —
especially in Hong Kong — grow wary of providing billions to
banks that less than five years ago already went to the markets
for similar amounts with their IPOs.

“Hong Kong is like an ATM machine, it is a place for
companies to raise funds because of its sufficient liquidity,”
said one investment banker, who did not want to be named as he
is not authorised to talk to the media.

The fund-raising plans have already cooled investor
appetite towards China banking stocks, which now trade well
below multiples for their global peers.

Despite reporting record quarterly earnings in the first
quarter, ICBC, CCB and Bank of China now trade at about 10
times 2010 forecast earnings, compared with 14-15 times for
international peers like HSBC (0005.HK: ) and Standard Chartered
(2888.HK: ).

Investors continued to shun the big banks on Monday after
China announced the reserve requirement hike. ICBC, CCB and
Bank of China all shed around 1.6 percent, helping to pull down
the broader Hang Seng Index (.HSI: ) by 1.4 percent.

Stock Market Research Tools

(Additional reporting by Doug Young in Hong Kong and Samuel
Shen in Shanghai)

DEALTALK-China banks race for funds on investor fatigue fears