Investment banking: China buys into raw materials
Corporate China’s drive to secure supplies of natural resources while they are available at low prices will be a big source of investment banking activity in Asia this year, according to bankers in the region. Aside from a record-breaking January in the debt market there has been little capital markets activity in 2009. However, several multi-billion dollar deals from China in the past few months suggest that its leading companies are aggressively seeking to take advantage of their cash reserves to buy assets across the world. These deals are fraught with political sensitivities, however, and the current crop will be closely monitored by potential buyers, sellers and advisers that might be considering joining the rush.
"The Chinalco deal is an interesting indicator of appetite from Chinese firms," says a Hong Kong-based M&A banker, "because the country has spent the past 25 years building up the huge disadvantage of a shortage of raw materials. This market has to be a great opportunity to rectify that situation. If you take a 10- or 20-year perspective, investing now has to get you some very attractive valuations."
Aluminium Corp of China (Chinalco) announced on February 12 that it would invest $12.3