Wednesday, April 19, 2006

China Construction Bank Eyeing Bear Stearns

After Lenovo's audacious move to buy the PC business of IBM, now we have rumours that China Construction Bank might be buying a stake in Bear Stearns. This is a reversal of normal moves by big investors such as Goldman Sach, Morgan Stanley, JP Morgan and Temasek - who have all been buying small stakes in Chinese banks to obtain a piece of the action in China's financial markets. China Construction Bank, a big boy in China, does the unconventional thing by considering a buy in reverse. Savvy! Hmm... jokes aplenty... A Chinese Bear Stearns ... would a name change to Panda Stearns be in the offing? CCB buying Bear Stearns... gives an entirely new meaning to the term Chinese Wall in investment banking.

Now, what we would not like to see is another blowout like the Dubai Ports World's acquisition of US ports operations. There better not be any over-gregarious US senators voicing displeasure over the potential acquisition. That is highly unlikely given that many US investment banks have been taking up strategic stakes in many Chinese banks over the last 3 years. Bear Stearns has a market capitalisation of around US$17.5 billion. Bear Stearns share price rose a bit more yesterday to close at an all time high. The thing is Bear Stearns does not have the financial muscle like Morgan Stanley or Goldman Sachs to pony up extras cash for stakes in Chinese banks - hence doing it this way solves the problem.

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