DBS Bank Ltd. expects more reforms in Chinese state-owned enterprises as merger and acquisition activities in the sector intensify, the Hong Kong Economic Journal reports.
Ginger Cheng Sze-ching, the bank’s managing director and large corporates head of institutional banking group, said a growing number of SOEs no longer seek a controlling stake in acquisitions, with the ownership threshold of some non-core businesses lowered to 30 to 40 percent.
They are also more keen on divesting from intensely competitive businesses, and this is likely to result in more mergers and acquisitions through asset swaps, spinoffs for separate listing and introduction of private capital, she said.
Consultation fees from related advisory services, coupled with loans for the “One Belt, One Road” initiative, will be the key growth drivers for lenders in the next three to five years, Cheng said.
Such growth may help offset the fall in lending income as a result of declining overseas bond issuances by Chinese companies, she added.
Alexander Lee Ho-wan, strategist at DBS Vickers Securities in Hong Kong, said SOE reforms are aimed at reducing costs, expanding business scale and increasing bargaining power overseas.
The amount of US dollar-denominated bonds newly issued by Chinese enterprises in the first three weeks of April has risen, compared with the level in the first three months, but it still represents a fall on a year-on-year basis.
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