18 February 2019

Some swim naked in the banking tide, others are serious surfers

A dizzying array of listed companies — with such diverse businesses as garments, pork and even fodder — has suddenly come out of the woodwork to signify their intention to venture into the banking domain.

Textile and clothing firm Hongdou (600400.CN), processed meat maker Yurun Food (01068.HK) and feedstuff producer New Hope Liuhe (000876.CN) are just a few of these banking wannabes, reportedly 27 at the end of September, which seem to have found a new calling after the State Council issued a set of guidelines encouraging private capital to enter the banking sector. It’s a much-awaited policy breakthrough — it has been 17 years since China Minsheng Bank (01988.HK, 600016.CN), the country’s first non-state-owned lender, was inaugurated back in 1996.

But did Beijing anticipate this kind of flood will happen when it thought of loosening its policy on the sector? True, the reform means small businesses may soon have easier access to credit. However, the surge of listed companies itching to tap into the sector may have raised not a few eyebrows – it seems the significance of the liberalization has been reduced to nothing but another chance to speculate, at least for the time being.

Kingfa Science & Technology (600143.CN), a producer of plastic materials, saw its shares soar by the 10 percent daily limit for two consecutive trading days last month — propelled by the rumor that it would approach some private enterprises for a proposed private bank. Although a senior executive clarified that the company was nowhere near any preliminary agreement, that did not stop its share price from climbing to a six-month high this week.

The same is true for KingTeller Technology (002177.CN) and Fosun Pharmaceutical (600196.CN), which both hit the daily gain limit on Thursday.

News that Gree Electric Appliances (000651.CN) was having discussions with several regional credit cooperatives also fueled its stock to a six-month high at the end of September.

Observers warn that regulatory gatekeepers won’t give applicants an easy time, despite their enthusiasm. The People’s Bank of China and the China Banking Regulatory Commission will all have a say in the process.

Still, some companies appear to be serious about their banking foray.

There’s Suning Commerce (002024.CN), which has already launched its small-loan business and wealth management services. The appliance retailer’s experience in these fields would boost its chance to secure a banking license.

Another frontrunner is commercial retailer Friendship & Apollo (002277.CN). Profit at its small-loan business surged threefold to over 50 million yuan (US$8.17 million) last year. The company has indicated that it would transform its small-loan unit into a fully functioning bank with backing from the provincial government of Hunan, its home base.

The company’s share price recorded a 60 percent gain in September following talk that the company would come out first in securing the banking regulator’s approval.

– Contact the writer at [email protected]



EJ Insight writer

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