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Focus on Long-Term Investment, China Life and Ping An Jointly Exploring Gold from CMBC

2007-8-13

 

China Securities Journal , Cao Zhiwei  Li Wenxuan

CMBC Targeting Financial Holding Company

After brewing for one year, the private placement of CMBC (600016) was completed recently, the subscription of RMB 18.16 billion contributed by the institutional investors has dropped into the pocket of CMBC, which eliminated CMBC’s years of embarrassment concerning capital adequacy ratio. Some executive of CMBC revealed that CMBC will implement diversified development strategy, establishing financial holding company, through external acquisition to achieve leapfrog development. Next, the Board will study on the issuance of H-shares or refinancing through other means. 　　

　　 Long-Term Investment into CMBC

“Long-term investment” is a common word used by China Life and Ping An Insurance. Liu Lefei, Chief Investment Officer of China Life Insurance Company Limited, indicated that investing into CMBC is a long-term behavior; China Life will not sell it for cash in short period.  　　

This time China Life and Ping An have subscribed the same amount of shares, however, because China Life has had held 170 million shares in circulation before, plus the 714 million shares subscribed this time, China Life with its 6.17% of shares of CMBC, becomes the single largest shareholder, and it has promised a lock-up period longer than other institutional investors. But considering the affiliated relationship between New Hope and Southern Hope, China Life will become the second largest shareholder, while Ping An with its 4.93% of shares becomes the fourth largest shareholder. 　　

A senior executive of CMBC indicates that the introduction of China Life and Ping An as the new shareholders will improve the business operation, strategic cooperation and governance structure of CMBC. Especially both of the two insurance companies are influential institutional investors in the capital market, which substantially enhanced CMBC’s image in the market.

As China Life become the single largest shareholder of CMBC, the cooperation between both parties will be upgraded. “Currently China Life invests into CMBC from the perspective of a financial investor, but it will be more active than a common financial investor,” said an executive of China Life responsible for investing, concerning the specific cooperation with CMBC, both parties have signed a strategic agreement.

Liu Lefei revealed that in the future China Life and CMBC will enhance strategic cooperation in cross-selling financial products, capital business, investment projects, asset securitization, and so on. As for when the investment into CMBC can be changed to strategic investment, he indicates that, “The possibility exists, but it needs a process of communications and consultation between both parties.” 　　

Concerning whether China Life considers holding more shares of CMBC, Liu Lefei indicates in the future if there is opportunity and value, China Life will increase placement, “China Life will enter into mixed business operation positively and stably with a strategy, currently we are unfamiliar with banking, the prior financial investment will be conducive to the strategic investment in the future, which is a prelude and trial before entering integrated business operation in the future.”　　

 

 

 

 

 

 

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