George Soros Turns To China
Forbes.Com, HONG KONG - George Soros is pouring money into Chinese stocks.
19 Nov 2009
That's because the billionaire believes China will emerge as the big winner
after the global financial crisis passes, while the United States will lose the
most in the long run from the recent turmoil.
In his latest investment, George Soros reportedly spent a combined $126 million
on subscriptions for new shares of China Minsheng Bank and Longfor Properties
in their initial public offerings in Hong Kong.
During the four-day international road show that kicked off this Monday, China
Minsheng Bank has attracted $14.1 billion worth of orders from international
investors, about three times oversubscription for the institutional tranche.
Among the big orders, Soros Fund Management has spent about $100 million on
subscriptions for the new Hong Kong-listed H-shares. Hopu Investment, a private
fund run by well-known Chinese investment banker Fang Fenglei, also placed a
huge order of up to $1 billion, according to information leaked from merchant
banks.
China Minsheng plans to raise as much as $4.1 billion in a Hong Kong IPO that
would be the world's fourth largest this year. The IPO's public placement
portion began Friday for retail investors to subscribe at 8.50 to 9.50 Hong
Kong dollars ($1.09 to $1.22) a share.
With total assets of 1,402 billion yuan ($206.2 billion), total loans to
customers of 893.5 billion yuan ($114.6 billion) and total deposits of 1,099.5
billion yuan ($141.0 billion), China Minsheng is the nation's seventh-largest
lender. In its listing prospectus, Minsheng forecast it would make more than 11
billion yuan ($1.6 billion) in consolidated net profit for this year.
After floating new shares in Hong Kong, the directors of Minsheng expected the
bank's capital adequacy ratio to increase to more than 12% from 8.57%, while
core tier 1 capital will advance to about 9% from the initial level of 6.02%,
approaching the international standard. In its third-quarter results
announcement this week, British banking giant HSBC disclosed its tier 1 ratio
increased to 10.3%, and the core equity tier 1 capital ratio strengthened to 9%.
Its scale aside, Minsheng's shareholding structure might be what's most
attractive to Soros.
Having already listed its A-shares in Shanghai, Minsheng was the first
non-state lender in China to be traded on the stock market. As the Chinese
government does not control any stakes in Minsheng, the bank has not received
any government funds to carve out bad assets.
Besides Minsheng, the investment fund under Soro has also subscribed up to 200
million Hong Kong dollars ($25.8 million) for new shares of Longfor Properties,
the top developer in China's biggest industrial city, Chongqing. Longfor has
raised 7.1 billion Hong Kong dollars ($906.4 million) from issuing new shares
this week that it will use to acquire new projects and to finance the
outstanding land costs of existing projects. Its trading debut is scheduled for
Nov. 19.
Sources from merchant banks revealed that Longfor had received more than $15
billion in subscriptions. For the institutional tranche alone, it recorded
about 12 times oversubscription.
Besides Soros, Chinese sovereign-wealth funds also contributed to the
overwhelming orders. Longfor disclosed in its listing prospectus that it had
already signed up five cornerstone investors. They include Singapore
state-owned investment fund Temasek, its sister company Government of Singapore
Investment Corp, the Singapore-listed Hong Kong Land and China Ping An
Insurance, as well as Bank of China
Soros is keen to invest in China. To understand more about China's latest
social and economic developments -- and to help him spot out investment targets
-- he recently met some Chinese scholars and experts in Budapest, where he was
born in 1930.
Best known as "the man who broke the Bank of England" by short-selling sterling
to gain $1.1 billion in 1992, Soros has been a prophet to investors around the
world.
At an Oct. 30 lecture titled "The Way Ahead, Comments On China" at Central
European University, Soros forecast that the global financial crisis will
totally alter the existing world order.
"The United States stands to lose the most, and China is poised to emerge as
the greatest winner," Soros predicted, because the crisis in the U.S. is an
internally-generated event that led to the collapse of the financial system,
while China was somewhat insulated from the financial crisis.
Despite the fact that China's exports have sharply dropped in the past year,
Soros believes China's financial, political and economic system were left
largely unscathed.
"China has discovered a remarkably efficient system of unleashing the creative,
inquisitive and entrepreneurial activity of the people who are allowed to
pursue their self-interests, while the state can cream off a significant
portion of the surplus value of their labor by maintaining an undervalued
currency and accumulating a trade surplus. So, China is likely to emerge as the
big winner," he explained.
Soros contends that China can stimulate its domestic economy through
investments in its infrastructure while also supporting its exports by
investing in and extending credit to its trading partners. It had been
financing its exports to America in the past, for example, by buying U.S.
government bonds. But now that American consumers are cutting back on spending,
China can use the same system with other countries. China is likely to be a
"positive force" in the global economy, Soros said, while the United States
will be "limping along."
--
Thomson Reuters contributed to this article.
