13.7.06

Industrial and Commercial Bank of China to Seek Dual Listing in Hong Kong and Shanghai

The Industrial and Commercial Bank of China has confirmed that it will seek a dual listing on the Hong Kong and Shanghai indices, which indicates bullish sentiment among Chinese policymakers for the mainland markets. This is in stark contrast to the consensus held for the last 18 months, during which ipso on the mainland capital markets were suspended because of extreme volatility following routine asset stripping and artificial deflation of IPO prices among corrupt brokerage houses and SOE executives. The mainland markets have shown signs of strength recently, hitting a two year high last week, but many institutional shortfalls will likely hamper any further maturity under a fresh IPO market. Lack of credible brokerages and institutional investors (such as pension funds) leave the markets off the buy sheets of most high profile investors, which leaves their fate in the hands of the individual Chinese investor, who is becoming more confident as of late, but still remains just as unpredictable as ever.

ICBC's Hong Kong listing will likely follow in the profitable footsteps of recent listings of two of the other five major Chinese banks, Bank of China and China Construction Bank. It is wishful thinking to assume the Shanghai listing will be as successful, but it seems evident to me that at the very least CCP policymakers see an opportunity to allow ordinary Chinese in on the success of its bullish financial sector, which has thus far been reserved for more globally focused investors who have the capital necessary to keep these investors out of the Hong Kong market. Whether or not the mainland investors can be counted on to buy early and hold onto their investment, rather than get caught up in an artificially motivated sell-off once the stock 'peaks,' which are typical of the mainland markets, remains to be seen. If this new strategy works, it will be a major political victory of the Communist Party, which has been struggling to find ways to let the general population share in the countries rapid economic growth.
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