The IPO, raising US$9.7 billion, the world’s largest for some six years, closed heavily oversubscribed and priced at HK$2.95 per share amid a clamour from retail and institutional investors alike.
“This is one deal that investors have to buy,” says a syndicate head in Hong Kong. Perhaps so, but does that apply regardless of price? Bank of China is being valued at 2.2 times book value. That might be justifiable if you buy into the inexorable growth of China’s domestic economy but what if China’s progress hits a bump in the road? And in any event, can the “book” in the equation really be trusted?
Accountants Ernst & Young recently estimated that non-performing loans of China’s four large state-owned banks stood at $358 billion, much higher than official estimates.
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