April 26, 2024

China Graft Inquiry Sweeps Up Oil Entrepreneur

The entrepreneur, Hua Bangsong, 47, is “now assisting the relevant authorities in the P.R.C. in their investigations,” according to a filing made late Monday to the Hong Kong Stock Exchange by Mr. Hua’s company, Wison Engineering Services.

A crackdown on corruption in China has intensified in recent weeks, focusing on the oil industry. Mr. Hua’s company is one of the largest nonstate contractors to the oil and gas industry in China, and counts China National Petroleum Corporation, or C.N.P.C., as one of its biggest customers.

Last week, four senior managers of C.N.P.C. and its subsidiary, PetroChina, were removed from their positions and placed under investigation on suspicion of what an official statement called “grave violations of discipline,” almost always a reference to corruption, bribe taking or embezzlement.

The investigation appeared to escalate on Sunday when Jiang Jiemin, director of the powerful commission that oversees the government’s stakes in the largest nonfinancial state companies in China, was also cited on suspicion of “grave violations of discipline,” according to a statement on the Web site of the party’s Central Commission for Discipline Inspection. Mr. Jiang had been general manager, then chairman of C.N.P.C. until March.

Mr. Jiang, a full member of the party’s elite Central Committee, became the highest-ranking official to be publicly cited for scrutiny since President Xi Jinping came to power last November. He pledged to battle official corruption at levels high and low, or taking down “tigers and flies.”

People with knowledge of the matter who cited senior officials said the investigations were centering on associates of Zhou Yongkang, one of China’s most senior leaders, who retired in November after five years in charge of the state security apparatus and had been a longtime oil executive and general manager of C.N.P.C.

Article source: http://www.nytimes.com/2013/09/03/business/global/china-graft-inquiry-sweeps-up-oil-entrepreneur.html?partner=rss&emc=rss

China’s Sovereign Wealth Fund Buys Shares in Major Banks

That word, disclosed by the banks late in Monday’s trading session, helped their share prices rebound somewhat on the Hong Kong stock exchange.

Chinese bank stocks have lost a third of their value so far this year, with most of the losses since August. Compared with the battered stocks of many European banks, the decline does not reflect worries about Greek bonds — Chinese banks have very few — but rather about the effects of stricter capital requirements by China’s regulators and worries about possible losses on domestic loans.

The China Banking Regulatory Commission is putting heavy pressure on banks to raise capital. The regulators want to prepare banks to meet rising international standards for capital adequacy and to strengthen the banks’ balance sheets against possible losses on big loans issued to Chinese companies and local governments during China’s economic stimulus program in 2009 and 2010.

The Agricultural Bank of China, one of the four main banks that together control two-thirds of the Chinese banking market, has already said that it intends to raise more capital next year. And investors have been watching for moves to sell shares by the other three: the Industrial and Commercial Bank of China, China Construction Bank and the Bank of China.

“One of the things depressing the share prices is that the existing public shareholders worry that they’re going to get diluted,” said Nicholas R. Lardy, a senior fellow at the Peter G. Peterson Institute for International Economics in Washington.

According to filings the four banks made with the Hong Kong stock exchange, the share purchases on Monday were made by Central Huijin, a holding company that is part of the country’s sovereign wealth fund, the China Investment Corporation. Central Huijin has a tangled history that has complicated China’s ability to regulate its banks.

Central Huijin already owns stakes in the banks that range from 35.4 percent of Industrial and Commercial Bank to 67.6 percent of the Bank of China. The purchases Monday will not alter these percentages significantly.

The central bank set up Central Huijin in 2003 to bail out the country’s banks after a surge in losses on loans issued to politically connected, state-owned enterprises in the mid-1990s.

Central Huijin was transferred in 2007 to the China Investment Corporation, which had been set up to invest part of the country’s foreign exchange reserves in the stock market. The move was controversial, in part because it involved issuance of bonds to compensate the central bank for the transfer. China Investment promised that it would collect enough dividends from the banks to make payments on the bonds.

As a result of that promise, the big Chinese banks have been paying out roughly half of their earnings in dividends since then, compared with only 10 to 12 percent for many industrial companies. That has slowed the banks’ ability to comply with regulators’ demands to build capital reserves.

The high dividend payouts, in conflict with the need to raise capital, have started to prompt grumbling by Chinese bank executives. Xiang Junbo, the chairman of the Agricultural Bank of China, was quoted in July by The Study Times, a weekly publication controlled by the Communist Party School, as saying that the country’s big banks “should avoid high levels of dividend payments while we are frequently going to the market for fund-raising exercises.”

But Lou Jiwei, the chairman of the China Investment Corporation, has said that Central Huijin needs 300 million renminbi a day, or $47 million, just to pay the interest on the bonds issued to compensate the central bank. Central Huijin cannot easily sell its shares in the banks to raise money for servicing that debt, because this would increase the number of shares in public circulation and could further depress the stock prices.

The announcements by the big four banks reversed a slide in their share prices earlier in the day. They posted small gains by the close, except for China Construction Bank; it fell 0.21 percent on the day, closing at 4.83 Hong Kong dollars, but was up from earlier lows.

Another worry for the banks lies in their exposure to special borrowing units of local governments. China’s National Audit Office said at the end of June that those loans — mainly for infrastructure projects that helped China spend its way out of the global economic downturn — had totaled 10.7 trillion renminbi, or $1.7 trillion, by the end of 2010.

The debt burden from those loans is putting heavy pressure on local governments to raise the fees for water, sewage and other municipal services that were greatly improved with the loans, but which continue to be provided to the public for less than their cost, Mr. Lardy, of the Peterson Institute, said.

Article source: http://feeds.nytimes.com/click.phdo?i=38aa7018651d9b50f96045993c925c2d

DealBook: Prada’s I.P.O. Debuts in Hong Kong Amid Investor Jitters

HONG KONG — One of the most closely eyed stock market debuts in months got off to a muted trading start, as shares in the Italian luxury fashion house Prada edged up slightly amid a blizzard of camera flashes and jostling journalists, bankers and company executives at the Hong Kong stock exchange on Friday.

With proceeds of $2.1 billion, Prada’s initial public offering was one of the five biggest in the world so far this year, according to Thomson Reuters, and valued the Italian company at a premium to other rival luxury companies.

Prada, which is based in Milan, is the first Italian company to list in Hong Kong, making the listing an important landmark for both Hong Kong and for the luxury sector. Asia has become a key source of revenues for many luxury goods companies in recent years, and analysts believe others could consider following in Prada’s footsteps with a decision to gain a listing in this Asian financial hub.

“This is a very important moment for our company,” said Patrizio Bertelli, the Prada chief executive, at a ceremony marking the trading start, adding that it was also a landmark for the Hong Kong exchange. Mr. Bertelli was speaking in Italian through an interpreter.

About a dozen other non-Asian companies, notably in consumer goods and resources sectors, may seek listings in Hong Kong this year, according to bankers here.

However, Prada’s listing coincided with a bout of intense global investor nervousness, and raised about one-fifth less than the amount Prada had originally hoped for.

By mid-morning on Friday, Prada shares were trading at 39.60 Hong Kong dollars , just above the issue price of 35.50 dollars.

Worries about Greece’s protracted debt crisis, and concerns that the Chinese economy’s growth prospects are not as rosy as they once were have weighed on global stock markets in recent weeks.

The Hang Seng index in Hong Kong is now about 4 percent below where it started the year, and in mainland China, the Shanghai composite has fallen about 3.8 percent since Jan. 1.

A string of I.P.O.’s have been mothballed in Asia in recent weeks. Others have been priced below earlier expectations, or performed poorly since their trading starts.

Shares in Samsonite were only moderately oversubscribed, and dropped sharply on their first trading day earlier this month.

The luggage maker, which was bought by the British private equity firm CVC Capital Partners in 2007, had previously been forced to price its shares at the lower end of its indicative range, bringing it proceeds of $1.25 billion, rather than the maximum $1.5 billion it had hoped for.

Article source: http://feeds.nytimes.com/click.phdo?i=e6976138ecd3df88fd351b5c3cfc768c