Business

Cinda: China 'bad bank' shares surge on debut

  • 12 December 2013
  • From the section Business
Woman counting yuan notes Image copyright AFP
Image caption A lending spree in recent years has seen a rise in bad loans at Chinese banks

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.

"Investors are clearly attracted to Cinda's initial public offering (IPO), which is also driven in part by the novelty factor,'' said Mark Chan, a partner specialising in corporate finance at law firm Berwin Leighton Paisner.

Cinda is the first state-owned asset management firm to seek a stock market listing. Mr Chan said that its success may prompt other similar firms to do the same.

"It is definitely tempting for other asset managers to follow suit, especially if Cinda is able to continue performing well after its listing.''

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