Equity Market Cools Down Around Mainland Banks
Two mainland banks had their lackluster debut in the Hong Kong Stock Exchange over concerns on declining margins and an increase in bad loans. Share prices for China Zheshang Bank and the Bank of Tianjing remained unchanged on the day that was benchmarked Hang Seng Index rallied at 2.15 percent to close at 20,803.49.
Investors are cool around mainland lenders by kicking of shares earlier this month in which at both banks set offers wherein Zheshang Bank HK$3.96 and Bank of Tianjin HK$7.39 per share. Both banks saw their international offers set at less than 10 percent oversubscribed due to cornerstones investors that showed little interest in the IPOs. Zheshang Bank only managed to sell one third or 30.85 of the planned 300 million shares, and Bank of Tianjin was able to sell 6.4 percent of their planned 90 million shares on the Hong Kong Stock Exchange. Last December the Bank of Qingdao floated its shares at the minimum price limit of HK$4.75, while the Bank of Jinzhou listed at HK$4.66. on its 120 million shares that was offered to Hong Kong investors, only 4.4 percent subscribed making it the worst recorded among the mainland lenders that seek listing.
Compared with State owned banks, these commercial banks are not cheap and their profitability seems to look fine now, but its major concerns are bad loans. As the central bank is expected to cut interest rates, the profit margins of mainland banks will be squeezed this year while smaller banks will be at the forefront when bad loans pick up even at the decelerating economic growth.