China Bad Bank Shares Impress on Debut

December 12, 2013 Share Print 0

Shares in Cinda Asset Management, which handles bad debts run up by Chinese banks, have surged on their debut.

The firm’s share rose as much as 23% to HK$4.79 in early trading in Hong Kong.

The state-owned firm is one of the four asset management companies created in the 1990s to take on bad loans of government controlled Chinese banks.

It has raised nearly $2.5bn (£1.1bn) via a share sale to fund new purchases of distressed assets amid a fresh rise in bad loans in China.

Bad debts at leading Chinese banks have risen after a big surge in lending in the years following the global financial crisis that unfolded in 2007-08.

Banks in the world’s second-largest economy lent out record sums of money in an attempt to sustain China’s high growth rate amid a slowdown in the global economy.

However, there are now concerns that banks may not be able to recover some of those loans.

Non-performing loans at Chinese banks rose to 563.6bn yuan ($93bn; £57bn) in the July-to-September quarter.

Analysts said that investors were betting on the firm being able to buy some of those distressed assets at a discounted price and sell them later for a profit.

via BBC

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.