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Investors fuel Cinda’s 27% rise on HK debut
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A CHINESE bad-debt management company’s shares soared in their Hong Kong debut yesterday, highlighting strong investor appetite for a business that will flourish if the world’s No. 2 economy stumbles.
China Cinda Asset Management’s shares rose 27 percent to close at HK$4.50 (58 US cents) after rising as much as 34 percent during the day.
The state-owned company is China’s first ever distressed asset management company to go public.
It’s a so-called “bad bank,” one of four big entities originally tasked with moving non-performing loans off the books of China’s state-owned banks.
Cinda raised HK$18.5 billion from its stock offering, making it the biggest initial public offering in Hong Kong this year.
There was exceptionally high interest from local retail investors, whose demand for the shares was 160 times the number available, and big institutional investors, whose portion of the global offering was “significantly oversubscribed,” according to a filing with Hong Kong’s stock exchange this week.
The company provides investors with a new twist on China’s growth story that has been based for decades on the promise of supercharged economic expansion.
Investors are betting the company, which makes money buying up distressed assets at a discount and reselling them for a profit, will benefit from rising levels of bad debt as China’s economy undergoes an uneven recovery after slowing to a two-decade low in the second quarter.
The country’s leaders say they’re comfortable with that slower pace. They are trying to shift the economy from reliance on exports and investment to domestic consumption.
In its prospectus, Cinda said net profit last year rose 8 percent to 7.3 billion yuan (US$1.2 billion). The firm may benefit as the number of loans in China going sour rises further.
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