China Construction Bank IPO Will Be A Blowout....

According to The Standard, investors are heavy subscribers to the CCB shares slated for issuance next week.

CCB, which is seeking to raise up to HK$73.1 billion from its global offering, lifted its IPO price range to HK$1.90 to HK$2.40 from HK$1.80 to HK$2.25 to reflect overseas institutional investors' warm reaction to the IPO. It also cut the lot size to 1,000 shares from 2,000 to be able to satisfy as many retail investors as possible. Phillip Securities senior research analyst Stephen Tse said, "The response would be stronger if the price range had not been revised and if the lot size had been left unchanged at 2,000 shares."

Kingston Lin, an associate director at Prudential Securities, said, "We estimate that CCB's shares have to go up at least 5 percent to allow margin borrowers to break even. The higher IPO price may trim the upside potential since it makes CCB's price-to-book value about two times, which is even more expensive than a blue-chip bank like HSBC Holdings."

Here is the game for Hong Kong investors.... put in for a multiple of the number of shares you want, lets say for example you have HK$100,000 that you want to invest. Your bank will lend you HK$900,000 so that you can subscribe for HK$1,000,000 of shares. Given that everyone is playing this game, the retail traunche will be heavily oversubscribed, and you will only get a small fraction of what you originally indicated. Say only a few thousand shares. You immediately sell these shares when the deal frees to trade and hopefully the profit will be greater than the interest that paid on the HK$900,000 you borrowed for the few days during the subscription period.

Well, this isn't investing its speculation or taking advantage of market liquidity. It has nothing to do with the value of the investment or whether or not it is a sensible investment. If the deal doesn't go as well as one thinks, you may get a lot more shares than you wanted and be forced to sell them irrespective of the price.

As far as I am concerned, one has to discern value when one makes an investing decision. For me, there are very few Chinese banks that I would have interest in investing in. Most are run by party officials that have zero knowledge of banking and only have interest in lining their own pockets. The banks are still technologically underinvested and really do not know what they are doing making loans. And also, I am sure that 6 months from now there will be a big scandal surrounding some senior managers at this bank. I, for one, am staying away. I can't be bothered with this kind of nonsense.