Brief China: US/China Trade Pact – Wake Up America and more

In this briefing:

  1. US/China Trade Pact – Wake Up America
  2. Bank of Guizhou IPO: Questionable Asset Quality and NIM Squeezed by Interest Rate Liberalisation
  3. OneConnect Financial IPO Trading – One of the Lowest Levels of First Day Trading Volume

1. US/China Trade Pact – Wake Up America

  • Not So Fast:  Mainland China is NOT reducing tariffs on USD 138 bn of existing US imports at rates of 5%-25%, and will only suspend new tariffs. The exchange rate of CNY/USD remains at 7 and is weakening and more than offsets the existing tariffs on mainland Chinese goods.
  • Pie In the Sky:Under Phase 2, the US is demanding mainland China address SOE subsidies, cyber attacks, cross-border data flows, et al.   
  • Desperate For A Deal: US seems more desperate for a deal than mainland China, despite what President Trump is parroting .  

2. Bank of Guizhou IPO: Questionable Asset Quality and NIM Squeezed by Interest Rate Liberalisation

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  • Bank of Guizhou is a leading commercial bank in Guizhou, a mountainous province in southwest China with a population of more than 35m and a GDP of more than $200bn.
  • The bank was established in 2012 by consolidating three city commercial banks in the Guizhou province.
  • It is ranked the 4th largest bank in Guizhou in terms of assets and the 5th largest in terms of deposits.
  • Major shareholders of the bank include state-owned entities or state-controlled publicly traded enterprises such as Kweichow Moutai.
Source: Company Disclosure

The exact details of the IPO, such as the number of shares to be issued and the price range are not available to the general public yet. However, various news sources expect Bank of Guizhou will raise around $800m from its Hong Kong IPO.

3. OneConnect Financial IPO Trading – One of the Lowest Levels of First Day Trading Volume

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OneConnect Financial Technology (OCFT US) (OC) raise around US$312m in its US listing. OC is a part of Ping An group. It provides cloud-native technology applications and technology-enabled services to financial institutions. 

In my previous notes, I spoke about the company’s products, its past growth and the heady valuation:

In this note, I’ll look at the deal dynamics and provide a table with implied valuation at different share price levels.

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