11 Dec 2019
Posted in Business Fundamentals
Postal Savings Bank of China’s lukewarm Shanghai debut reflects underlining investor concerns, says GlobalData
Following the tepid debut of Postal Savings Bank of China (PSBC) on Shanghai Stock Exchange on 10 December 2019;
Aurojyoti Bose, Lead Analyst at GlobalData, a leading data and analytics company, offers his view on the first day of trading:
“Postal Savings Bank of China, which is the largest bank in China in terms of the number of branches, raised approximately US$4bn in initial public offering (IPO) proceeds, making it the country’s biggest IPO since 2015. However, the share prices moved just 2% higher than the IPO price of CNY5.5 and closed at CNY5.61 at the end of the first day of trading. It is in stark contrast to the double digit growth witnessed in most of the IPOs on the first trading day in the stock exchange.
“Interest in the bank’s shares remained subdued with some investors, who were allocated PSBC shares, turning down the bank’s stocks a week before it went public. The underwhelming stock performance of PSBC can primarily be attributed to bearish investor sentiments for banking stocks in the country on the backdrop of credit risk concerns and a slowing economy.
“Concerns around banking sector in China increased significantly following the recent failures/bailout of three banks, Baoshang Bank, Bank of Jinzhou and Hengfeng Bank. The worries were further intensified with China’s central bank making a statement that more than 13% of the banks/financial service providers in the country were risky.
“Moreover, slowing economy is affecting the loan portfolio and financial performance of banks. However, amidst all these concerns, PSBC has been generating profits and seems to be resilient with an extensive branch network supporting growth in deposits, which stood at CNY9,239.7bn at the end of Q3 2019. Hence, it will be interesting to see if the bank is able to win investor trust in the long-run.”