More on the Go-Go years in China
When we use the term Go-Go years, we are referring to John Brooks’ wonderful book on the stock market boom and bust of the 1960′s in the United States. Here’s what’s happening today on China’s most recent bank IPO, via WSJ:
China Citic Bank Corp. soared on its first day of trading Friday in Hong Kong and Shanghai, reflecting strong investor interest in the world’s largest initial public offering so far this year. The IPO by China’s seventh-largest bank by assets raised US$5.4 billion in the second simultaneous dual listing in the two cities after Industrial & Commercial Bank Co.’s US$21.9 billion listing in October. ICBC’s share sale was the world’s biggest IPO.
The bank’s Hong Kong dollar-denominated Class H shares rose 14% on the Hong Kong stock exchange despite a general decline in the banking sector. The shares closed at 6.68 Hong Kong dollars (86 U.S. cents), up from the IPO price of HK$5.86, and outperformed a 0.7% fall in the Hang Seng Index. An overallotment option of 15% of the Class H shares will likely be triggered as its retail tranche was more than 100 times subscribed…
At the IPO price of HK$5.8, Citic Bank’s shares were already trading at 36.5 times 2007 earnings, much higher than the 18 to 24 times for peers such as Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. But Macquarie Research said it expects Citic Bank to boost earnings “significantly faster than other China banks,” which may justify the high valuation. It expects Citic Bank’s earnings to grow at an average of 41% in the next three years on robust retail loan growth and cost-efficient operations, faster than the 20%-27% it forecast for the bank’s peers.
Imagine: bank shares trading at a 40x p/e ratio. Hah! Enjoy it while it lasts.