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Hong Kong’s Bank of China Planning to Foray into Southeast Asia

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Published on : Aug 13, 2015

Bank of China, located in Hong Kong, is creating much buzz lately. The bank at present is chalking plans to sell of the Nanyang Commercial Bank, its commercial lender, which is slated to market the largest ever bank deal witnessed in Hong Kong. With the onset of the news, the BOC Hong Kong shares has jumped by 8 per cent, registering an all-time high during late-May. 

The bidding for NCB at HKD68 billion was opened by BOCHK recently in an auction. The bidding will remain open until late-August. If the sale is successful, the proceeds generated from there could prove to be a windfall for shareholders – which is a key reason why shares remain within the limits of their all-time peak even after a recent pullback – the shares, according to experts, can also help fund a significant push into Southeast Asia. 

If skyscrapers of Bank of China was designed to overlook upon rivals in Hong Kong’s central business district, a bigger regional presence for BOC will surely help it to tower over other banks of Asia. 

The plans to expand the operations of banks across Southeast Asia, chimes with “One Belt, One Road” – Xi Jinping’s grand plan. While investors rush to buy the shares of BOCHK they can be rest assured that the road of investment they took is definitely not a road that will lead you to nowhere. Famous companies are already sniffing around, of whom China Resource Holding is the most notable name. However, this party is only open for the Chinese state-owned enterprises. Furthermore, there is little guarantee for BOCHK getting the price asked for NCB, with the asset quality deteriorating fast in China. The price set for HKD68 billion easily translates to a bumper price double the book value of NCB. Against the incumbent backdrop, JP Morgan has also revealed its plans for presenting disinvestment gains post tax at a subtle HKD26 billion.