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Smaller Chinese mainland banks list in HK

Updated: 2013-11-01 11:15

Smaller Chinese mainland banks are getting ready to list in Hong Kong after a three-year hiatus. What does this mean for Chinese mainland lenders and Hong Kong's IPO market?

The biggest float that captivated Hong Kong earlier this year has now got some serious competition. There is a different kind of "float fever" that coming to Hong Kong. After a near three-year freeze, mainland banks are now lining up to get listed in the city.

And it may as well keep restless investors occupied, after being disappointed by Alibaba's decision to put off listing plans altogether for now, be it in Hong Kong or New York.

On the docket at the Hong Kong Stock Exchange: China Everbright, Bank of Chongqing, Bank of Shanghai and Bank of Harbin. The float of these Chinese banks though are coming in at depressed valuations, even though the mainland market has recovered somewhat from its sell-off in June.

Hong Hao of Bank of Communications International explains why. "To me it's not the best time to sell. You know the Chinese banks in 2006 and 2007 they traded about two to three times book, and now it's less than 50 percent of the valuation. So it's not an ideal time to sell. But at the same time, it is an indication of capital requirement urgency among the smaller banks," Hong said.

Valuations aside, Hao is confident the listings will facilitate bond issuances and give banks more ways to beef up their capital ahead of further financial reforms. For now, financials will lord over the listing scene here, until Alibaba picks up from where it left off.

Investors in Hong Kong should find relief that hope floats in the markets once again, before the year comes to a close.

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Smaller Chinese mainland banks list in HK

An outlet of Bank of Chongqing is seen located in the city of Southwest China's Chongqing on May 6, 2012. [Huo Huang/Asianewsphoto]