After 18 months of negotiations, US-based buyout firm Carlyle Group and its partner US insurer Prudential Financial signed a US$400 million deal in September for a 25% stake in China Pacific Life CPL), China's largest life insurer. The deal was reached after Carlyle agreed to convert its CPL stake into shares in CPL's parent, China Pacific Insurance, at a later date, a move that would help the latter offer its shares to the public. Carlyle and Prudential have asked to increase their stake to 49% when allowed by regulators, Bloomberg reported. The Carlyle deal is not expected to affect the bid by Temasek, Singapore's state-owned investment company, to acquire stakes in CPI. "The negotiations are happening at two different levels," CPI chairman Wang Guoliang, told the Financial Times.
Meanwhile, HSBC agreed to pay US$1.04 billion to increase its holdings in Ping An Insurance to 19.9%, but few expect HSBC to stop there. Ping An is China's second-largest insurance company, with first half net profits this year up 49% from 2004.
While less than 4% of China's 1.3 billion are insured, the country's insurance market is growing at 25-30% annually. It currently has about 50 million customers, generating US$52 billion of premiums in 2004, a tripling in value over the last five years. Foreign companies have thus far sought to enter China's insurance market through JVs with local companies, but the HSBC and Carlyle deals suggest the JV route may no longer be necessary.
Temasek acquires BoC stake
Marking the largest single foreign investment in a Chinese bank to date, Singapore's Temasek Holdings agreed to pay US$3.1 billion for a 10% stake in Bank of China and to buy another US$500 million of shares in BoC's planned IPO. Temasek had previously taken stakes in China Construction Bank and China Minsheng Banking Co, forging several China bank connections, unlike foreign banks that have bought large stakes in a single bank.
Prudential and CITIC in JV
The UK-based insurance group Prudential said it has received approval from the China Securities Regulatory Commission to set up a fund management joint venture with Mainland financial services group CITIC, Agence France-Presse reported. Prudential and CITIC will hold equal stakes in the CITIC Prudential Fund Management Company, with the remainder held by China-Singapore Suzhou Industrial Park Venture Company and Suzhou New District Economic Development Group. The company will offer retail investment products across China. Prudential did not disclose financial details of the deal.
Bohai Bank launches
China launched Bohai Bank, The first stock-holding commercial bank created on the Mainland in nine years. The bank is 19.9%-owned by UK-based Standard Chartered, marking The first time a foreign investor has been a founding member in a Chinese bank. Tianjin's TEDA Investment Holding Co has a 25% stake. Bohai has a registered capital of US$618 million.
Bocom applies to set up insurance JV
Bank of Communications (Bocom) applied to set up an insurance joint venture on the Mainland to diversify its business and expand its non-interest income, the South China Morning Post reported. The proposed venture would be led by China Communications Insurance, Bocom's Hong Kong insurance unit, thereby circumventing regulations that ban mainland banks from investing directly in domestic insurance companies.
Guangdong Bank lines up investors
DBS and Deutsche Bank will purchase 10 billion shares in Guangdong Development Bank (GDB) for a total price of US$2.18 billion but will not take a controlling stake. According to China Business News, the Guangdong government plans to inject US$2.47 billion into GDB to maintain its control, while People's Bank of China intends to re-loan US$1.23-2.47 billion to the bank. The financial reshuffling, scheduled to be completed before December, is expected put GDB in a position to be listed within two years.
HSBC eyes bigger share of Bocom
HSBC is considering doubling its stake in Bank of Communications (Bocom) to about 40% provided it can negotiate a change in state restrictions that currently limit foreign investment in banks to 20%, state media reported. The global banking giant wants to use Bocom, which raised US$2.2 billion through an initial public offering in Hong Kong in June, to spearhead its investment in China.
Temasek to invest US$2.4 bn in CCB
Singapore's state-owned fund management company Temasek Holdings is poised to double its investment in China Construction Bank (CCB) through a US$1.4 billion stock purchase ahead of the group's initial public offering in October, Bloomberg reported. This comes in addition to the US$1 billion Temasek has already pledged to the IPO. The move is seen as part of the Temasek's efforts to expand its financial investments across Asia and reduce its reliance on Singapore, which currently accounts for more than half its assets.
Allianz to lose China partner
Dazhong Insurance Co is to pull out of its partnership with Allianz, Europe's largest insurer in order to focus on the property and casualty insurance sectors, Bloomberg reported. The Chinese company is now looking to sell its 49% stake in Allied Dazhong Life Insurance Co, which was set up in 1999 with US$24.7 million in capital. Allianz said it remains committed to the Chinese insurance market, which is worth US$40 billion and growing at 25-30% a year. South China Morning Post reported. The proposed venture would be led by China Communications Insurance, Bocom's Hong Kong insurance unit, thereby circumventing regulations that ban mainland banks from investing directly in domestic insurance companies.
Guangdong Bank lines up investors
DBS and Deutsche Bank will purchase 10 billion shares in Guangdong Development Bank (GDB) for a total price of US$2.18 billion but will not take a controlling stake. According to China Business News, the Guangdong government plans to inject US$2.47 billion into GDB to maintain its control, while People's Bank of China intends to reloan US$1.23-2.47 billion to the bank. The financial reshuffling, scheduled to be completed before December, is expected put GDB in a position to be listed within two years. HSBC eyes bigger share of Bocom HSBC is considering doubling its stake in Bank of Communications (Bocom) to about 40% provided it can negotiate a change in state restrictions that currently limit foreign investment in banks to 20%, state media reported. The global banking giant wants to use Bocom, which raised US$2.2 billion through an initial public offering in Hong Kong in June, to spearhead its investment in China.
Temasek to invest US$2.4 bn in CCB
Singapore's state-owned fund management company Temasek Holdings is poised to double its investment in China Construction Bank (CCB) through a US$1.4 billion stock purchase ahead of the group's initial public offering in October, Bloomberg reported. This comes in addition to the US$1 billion Temasek has already pledged to the IPO. The move is seen as part of the Temasek's efforts to expand its financial investments across Asia and reduce its reliance on Singapore, which currently accounts for more than half its assets.
Allianz to lose China partner
Dazhong Insurance Co is to pull out of its partnership with Allianz, Europe's largest insurer in order to focus on the property and casualty insurance sectors, Bloomberg reported. The Chinese company is now looking to sell its 49% stake in Allied Dazhong Life Insurance Co, which was set up in 1999 with US$24.7 million in capital. Allianz said it remains committed the Chinese insurance market, which is worth US$40 billion and growing at 25-30% a year.
Insurers can raise bond investment
Yielding to the lobbying by Chinese insurers in search of higher investment returns, China is allowing insurers to increase their investments from 20% to up to 30% of total assets in domestic corporate bonds and short-term bills, AFP reported, citing the China Insurance Regulatory Commission. According to the CIRC rules, insurers can only invest in bonds issued by firms with good credit ratings and must limit investment in a single firm to 10% of their total assets. Investment in treasury bonds and debt issued by policy banks has no restrictions.
PBOC increases deposit rates
The People's Bank of China announced it was lifting domestic US and Hong Kong dollar deposit rates by 0.375 percentage point, the second increase since the revaluation of the yuan on July 21. The benchmark one-year deposit rate for US dollars went up to 2%, while the rate for Hong Kong dollars rose to 1.9%, the central bank said in a statement posted on its website. Market observers said the move was part of ongoing exchange regime reforms and aimed at deterring further speculation on the yuan.
Citigroup may raise stake in PDB
Citigroup is planning to raise its stake in Shanghai Pudong Development Bank (PDB), the country's third-largest listed lender, to as much as 20%. Citigroup, the world's largest financial services provider, paid US$72 million for 4.6% of the bank in January 2003 and is pondering additional investment in response to purchases made by rivals such as HSBC Holdings and Bank of America in larger Chinese banks. Based on PDB's current share price, Citigroup would have to pay as much US$617 million, although foreign investors often secure steep discounts.
CCB to sell mortgage-backed securities
China Construction Bank, China's top property lender, will become the first Chinese bank to sell mortgage-backed securities when it underwrites the issue of more than US$371 million in October just as it launches its US$5 billion IPO.
New co to handle PBOC NPLs
A new management company was set up to dispose of bad loans and other assets held by the People's Bank of China. Huida Asset Management, which is 90% owned by Cinda, began operations late August, according to state-run China Cinda Asset Management Corp. Details relating to the size of the central bank's non-performing assets were not disclosed.