Warrants, Buffett rumor boost banks
Shares of China Merchants Bank (3968) and Bank of Communications (3328) climbed Tuesday to all-time highs since listing, as heavy trading in warrants drove the lenders.
China Merchants Bank, the mainland’s sixth-largest lender, closed at HK$11.72, the highest since its September 22 listing and a jump of 6.74 percent from Friday’s close. A total of 209 million shares changed hands.
Bank of Communications (3328), the fifth-largest lender by assets, climbed to HK$5.72 Tuesday, also a new high since its trading debut. The stock was up 2.19 percent or 12 HK cents, with 87 million shares traded. Turnover amounted to HK$487 million.
There was also heavy trading in China Construction Bank (0939) and China Merchants Bank shares, with transactions amounting to HK$3.6 billion and HK$2.39 billion. In terms of total turnover on the day, the two banks ranked one and two by value.
A rumor about a well-known US billionaire was a catalyst for heavy trades. “There was a rumor that Warren Buffett is eyeing China Merchants Bank and this boosted sentiment,” a broker said.
Analysts said investors seeking higher quality financial stocks turned to China Construction Bank and China Merchants Bank.
“After reading the financials of ICBC, whose preliminary offering documents have been posted online, investors have found the two banks to be more attractive,” said a banking analyst.
Warrants trade added momentum to the shares. Trading in warrants of China Merchants Bank alone amounted to HK$2.16 billion Tuesday, accounting for 24.46 percent of total turnover among the top 10 warrants traded. Warrants of China Merchants Bank, CCB, BoCom and Bank of China (3988) added up to HK$3.41 billion, or 38.5 percent of total turnover.
“China Merchants Bank was the hottest stock,” the banking analyst said. “Pent-up demand for shares was huge after speculators exited on the first few trading days. The sector will be the focus at least until ICBC kicks off its IPO roadshow next week.”
Meanwhile, China Merchants Bank has sped up the expansion of its credit card business. It signed a strategic partnership with AirPlus International, a leading international provider of business travel payment solutions, to offer a new corporate card in China this month.
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I don’t follow the foreign markets that much but I was intrigued by the swift rise of the CMB warrants listed on the SGX over the last few weeks. Just read on Forbes Asia that it is recommended by Jim Grant — a veteran market observer — as a good play on China’s banking despite all the background fears about non-performing loans in China’s banks. They’re General Electric’s local currency bankers in China.