Posted by: Frederik Balfour on June 10, 2009
One of my alert New York editors [hat tip to Cristina Lindblad] sent me this nice little story from the Deal which points out how foreign banks including Bank of America, Goldman Sachs and UBS have been netting healthy gains from their disposal of stakes in Chinese banks since the crisis. Goldman, for example, bagged $1.9 billion on June 2 when it sold less than 1% of ICBC [its stake of remaining 3.9% is still locked in until 2010], and Bank of America got $7.3 billion last month when it sold 5.6% of China Construction Bank. And according to the Wall Street Journal, TPG’s Asian arm, Newbridge Capital, is poised to sell off part of its 17% stake worth $1.5 billion in Shenzhen Development Bank, about 10 times what it paid for it in 2004.
Readers may recall that a few years ago many Chinese were incensed when chunks of their banks were sold off at discounts to foreign banks around the time they listed their shares. At the time, the overseas investors were considered necessary to help IPOS, and shareholders who did snap up these issues have done very well for themselves.
Had it not been for the financial crisis, the banks may have held onto their Chinese stakes a lot longer, but the huge rally in mainland stocks –Shanghai is up about 55% this year, and Shenzhen even more—has come at a propitious time for them.
The fact that foreign institutions are making out like bandits must surely rankle folks high up the ranks in Beijing as China’s forays into foreign financial institutions has been something of a debacle. China Investment Corp. had egg on its face after making a $5 billion investment in Morgan Stanley in early 2008 just months before the wheels started falling off, and the State Investment Company’s investment in Blackstone last summer proved a major embarrassment.
Interestingly, in today’s Shanghai Daily newspaper, China has announced it will ease curbs on overseas lending from parent companies to their subsidiaries to encourage them to go global. Perhaps the collapsed $19.5 billion purchase by Chinalco of Rio Tinto has made Beijing look for other ways in which Chinese aspiring companies with global ambitions can extend their reach.