Skip to main content
China A-Shares / Banks / Bad Debts
The Bigger Picture

Shenzhen and Shanghai exchanges have their A-shares, and for the 26 companies who also list their shares in Hong Kong, the shares are known as H-shares in Hong Kong. It used to be that A-shares trade at a big premium to H-shares, and that has been the case for the past few years. Something funny happened on my way to the Communist Great Hall, now the H-shares trade at a premium to the A-shares!!! It appears that the Chinese stocks have been having a torrid 4-year slump. This also meant that Chinese citizens in China have been hit badly and are beginning to shun investing in local stocks. It could also mean that fund managers are more comfortable now to buy H-shares, or that Hong Kongers are more liquid now and are beginning to buy H-shares in a big way. This could also means that the overall share valuation for Chinese companies listed on China exchanges are no longer frothy.

The bigger picture is that, Chinese companies listed on HKSE and Singapore have performed remarkably well over the last 2 years. The valuation was boosted by the strong liquidity driven rallies in both markets over the last 12 months. The bigger and better known Chinese companies head for HKSE while the lesser known and smaller companies opt for Singapore - but both types did well. It is not just a matter of liquidity prevalent in HK and Singapore, but rather an improving perception that China companies listed in HK and Singapore (including those with a dual listing) that they have a more stringent check and balance on these companies' financials. Better corporate governance and transparency requirements from the more established exchanges seem to have yielded more confidence among institutional and retail investors in HK and Singapore. Despite the high-profile bust for China Aviation Oil or CAO (Singapore) Corporation, which lost US$550 million in speculative trading, making it one of the biggest business scandals in Asia since Nick Leeson lost US$1.4 billion at Barings Bank in 1995, Chinese companies listed in Singapore were largely unaffected.

Today saw the trading for the massive Bank of China's IPO - which was a great success. This follows on the heels of the highly successful listing for China Construction Bank last October in HK. This brings us to the grave problems that I have with China's economy. A recent study by Ernst & Young estimated that China's total bad debt liabilities stood at US$911 billion, and not the official figure of US$400 billion touted by the government. Even at US$911 billion, while huge, it is surmountable provided Chinese banks continue to improve on their risk and credit management practices. It would have been a time bomb waiting to explode if the authorities did not open up the bigger banks to foreign shareholdings. The last 3 years have seen numerous foreign banks / government investing agencies / private equity firms buying minority stakes in the bigger Chinese banks - the bigger implication is that by opening up to these new shareholders, Chinese banks would have a much greater chance to manage and whittle down the overall bad debts and eliminate the doomsday scenario. Global investors should be glad that this has basically averted a massive crunch or correction badly needed within China's financial system.

Now, let's just try and get a handle on the excessive property bubble.


Popular posts from this blog

My Master, A National Treasure

REPOST:  Its been more than two years since I posted on my sifu. This is probably the most significant posting I had done thus far that does not involve business or politics. My circle of close friends and business colleagues have benefited significantly from his treatment.

My Master, Dr. Law Chin Han (from my iPhone)

Where shall I start? OK, just based on real life experiences of those who are close to me. The entire Tong family (Bukit Kiara Properties) absolutely swear that he is the master of masters when it comes to acupuncture (and dentistry as well). To me, you can probably find many great dentists, but to find a real Master in acupuncture, thats a whole different ballgame.

I am not big aficionado of Chinese medicine or acupuncture initially. I guess you have to go through the whole shebang to appreciate the real life changing effects from a master.

My business partner and very close friend went to him after 15 years of persistent gout problem, he will get his heavy attacks at least…

Long Weekends

Passengers - Go Watch It

Passengers. Brilliant story telling. Visionary yet believable. Like Martian, only better. Space travel, science, romantic, desolation, philosophical, mortality n its devastation, spectacular imagery. Being human n humane. 9.7/10