The Aluminum Company of America, better known as ALCOA sold its entire 7 percent stake in its largest Chinese counterpart, Aluminum Company of China, or CHALCO for short (ALCOC just doesn’t quite have the same pizzazz, not to mention potentially misleading). ALCOA acquired the Chalco stake for roughly USD $200 million back in 2001 when the Chinese firm went public in Hong Kong. And six years later, the same stake just exchanged hands for 10 times the value, USD$2 billion. 25 major institutions were reported buyers, and just to be nice, ALCOA priced the shares at 15 percent below market, how very generous!
While the US real-estate market maybe suffering from a bout of subprime malaise as of late, China’s housing boom continues unabated (until it hits a wall of its own). According to numbers released yesterday, in August, prices for new construction among China’s top 70 metro areas on average are up 8.2 percent year over year, and 1.4 percent sequentially. Shenzhen leads the pack with a 20 percent annual appreciation rate. Shanghai in comparison, sports a far more modest yearly increase of just 3.6 percent. Chinese residential real estate market has been on a tear since 2000. Prices in several top tier cities have already gone up 300 to 500 percent coming into this year.
And finally, Bank of Beijing priced its upcoming IPO today at RMB 12.5 per share. That puts the new issue at a bargain basement price to earning ratio of just 36.38, cheap! Two other recently gone public regional banks, Bank of Nanjing and Bank of Ningbo have done very well in the secondary market, the former garnering of PE of 68 and the latter well north of 100! To put things in perspective, most regional banks in the US sell for 10 times their earnings. Granted, Chinese banks are on a higher growth trajectory, but at 100 PE (equivalent of 1% interest rate), investors are better off putting their money in the bank than… in the bank, well you know what we mean.
Jay Sheng is Shanghaiist’s Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.