Money

Plans to raise funds should stay, says Lee

By Jean Yoon and Samuel Shen (China Daily)
Updated: 2010-05-25 10:17

SHANGHAI - The head of HSBC's China fund venture said on Monday he expected top Chinese banks to push ahead with their fundraising plans this year despite unstable market conditions.

All top-ranking Chinese banks - Industrial and Commercial Bank of China, China Construction Bank and Bank of China - plan mega-sized fundraisings to boost their coffers after a lending spree last year.

Unlisted Agriculture Bank of China is looking at a $30 billion initial public offering.

However, deteriorating market conditions have raised concerns over the timing of these plans.

Guo Shuqing, chairman of China Construction Bank, told Reuters last week the bank may delay its planned $11 billion capital raising to early next year due to uncertain market conditions.

"Many banks are still looking at doing it this year. Market fundamentals are good. The market should be able to absorb," Steve Lee, chief executive officer of HSBC Jintrust Fund Management Co, told Reuters in an interview in Shanghai.

"But in China, one cannot avoid political headwinds. Everything in China is partly commercial and partly political," he said, referring to potential delays if that is what the government wants.

Underwriters of these deals have reached out to fund managers in China, such as HSBC Jintrust, to test the market.

China's main stock index has tumbled nearly 20 percent this year, dragged down by monetary tightening as well as the lenders' massive fundraising plans.

Chinese banking shares have already priced in negative elements including bad-loan concerns, and their valuations are now reasonable, said Lee, who keeps a blog in Chinese to offer financial guidance to his followers. Each blog he writes gets roughly 10,000-20,000 hits.

Relaxed rules

HSBC Jintrust, 49 percent owned by HSBC, Europe's biggest bank, is among fund companies lobbying Beijing to relax rules on cross-border investment by allowing yuan held offshore to be invested in domestic mutual funds, Lee said.

Shanghai is considering easing capital controls to allow yuan held offshore to be invested in domestic bonds, equities and interbank instruments, to promote international usage of the Chinese currency, Fang Xinghai, a Shanghai government official, told Reuters in April.

"We're all lobbying the government to give domestic fund managers more leeway in competing in the market," Lee said, adding his company has been participating in government consultations regarding the rule changes.

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"If Shanghai was going to be an international financial centre... restrictions on inbound and outbound investment need to be removed," said Lee, who likes to take pictures of his staff with his Canon DSLR camera in his spare time.

Foreign investors can now only invest in China's capital markets under the so-called Qualified Foreign Institutional Investor (QFII) scheme, after converting foreign currencies into the yuan.

But as China encourages the use of the yuan in regional trade settlements, a increasing number of foreigners holding the Chinese currency are looking for investment channels.

China's Shanxi Trust and Investment owns the remaining 51 percent of HSBC Jintrust, which has about 10 billion yuan in assets under management.

Reuters