Transcript Econ 310 Section 2 Financial Institution in H.K.

Econ 310 Section 2
Financial Institution in H.K.
Group 7 Member List
Mak Ching Yue
033008
Law Kin Shek
033036
Li Ka Kit
033085
Wong Hiu Tung
033086
Luk Chun Hung
033096
Po Ka Ho
033220
Investment Bank –
Morgan Stanley
I.P.O of China Construction
Bank
Introduction

Main function of Morgan Stanley


Underwriting and distributing new
security issues
I.P.O of China Construction Bank

Schedule of procedure
Aries
IPO procedure of CCB
 In
2004, Several investment banks
plan proposal to become the
underwriter
 17/3/2005,
Morgan Stanley approach
the management of CCB
Aries
IPO procedure of CCB
 17-June-2005
Citigroup, Morgan Stanley, JP Morgan,
UBS etc. discussed with CCB.
 Morgan Stanley uses US$30 billion
 Temasek Holdings uses US$15 billion &
buy US$10 billion in IPO

Morgan
Stanley Won!!
Kenneth
IPO procedure of CCB
 From
September, October 2005
 Road
Show
 Price: $1.8--$2.15 (Initially)
 Popular!!
Kenneth
IPO procedure of CCB
 10/10/2005:
CCB decided to raise the
price range to $1.9-$2.4 dollar per
share
 many investment bank disagree the
price range as it is too high
 suitable price should be $2.1
Ryan
IPO procedure of CCB
 14/10/2005:
the investment banks
accept the change
 Prepare
the document
 Help distributing them to the bank
such as HSBC, CCB, etc
Ryan
IPO procedure of CCB
 19/10/2005:
Morgan Stanley and the
other underwriters discuss about the
last price of CCB
CCB wanted to set the price at $2.4
 Investment bank deem that the price
should be lower
 The last price is $2.35 per share

Ryan
IPO procedure of CCB
 26-Oct-2005


Announce the offer price
Basis of allotment
Franco
Basis of allotment
Number of shares
applied for:
Number of
applications:
Basis of allotment:
1,000
42,111
1,000 shares
2,000
36,630
1,000 shares
20,000
20,506
2,000 shares + 7777
out of 10253 to
receive additional
1,000 shares
600,000,000
1
14,904,000 shares
Dispatch of shares and refund of cheques
Franco
IPO procedure of CCB
 27-10-2005



The first trading day of CCB
Access the stabilization period
To prevent and retard decline in
the market price
Franco
Benefits
 Commission
 Gross
Spread
 Right of buying options
 Increase their brand name
Cyrus
Commission
 2.5% of the offer price payable for the
Hong Kong Offer Shares
 1,324,298,000 x $2.35 x 2.5%
Cyrus
Gross Spread
1.38-1.44
2.35
Cyrus
Right of buying options



Morgan Stanley can have the right of
buying options before 2011 in the
price of 2.35
the P/B value is over 2.4 times
the price is about $2.85
Cyrus
Increase their brand name
 CCB
is a famous bank in China
 More people know about the
Morgan Stanley
 Goodwill of the investment bank
Cyrus
Risk

The process of underwriting a stock or
bond issue requires that the securities firm
purchase the entire issue at a
predetermined price and then resell it in the
market.

Taken on the risk of distributing the
securities
Calvin
Risk



Although the investment bank do not
need to end up holding some securities
themselves.
But they cannot get any commission and
the cost of preparing has already paid.
So that invetsment bank will have a risk to
lose.
Calvin
Risk

Stabilization is a practice used by
underwriters in some markets to facilitate
the distribution of securities

The underwriters may bid for, or purchase,
the securities in the secondary market,
during a specified period of time
Calvin
Risk

Prevent any decline in the market price of
the securities below the offer price

Investment bank need to buy the share in
the market
Calvin
Question Time (M.C.)
Cyrus
1.) What is the final listing price
of China Construction Bank?
A.)
B.)
C.)
D.)
E.)
$2.575
$2.325
$2.350
$2.300
None of the above
2.) When is the stable time of
the China Construction Bank
until....
A.)
B.)
C.)
D.)
E.)
18-Oct-2005
18-Nov-2005
19-Nov-2005
30-Nov-2005
None of the above
3.) What is the main investment
bank of China Construction
Bank?
A.)
B.)
C.)
D.)
E.)
Hong Kong and Shanghai Bank
Citigroup
JP Morgan
Credit Swiss First Boston
None of the above
The End