HSBC Buys 51% Stake in Korea Exchange Bank

123jump.com Staff
03 Sep, 2007
New York City

Asian market closed traded mixed in cautious trading. In thin volume investors reacted to local news and announced deals. Korea reported second quarter economic growth of 1.8% on rising exports and strong manufacturing sector. HSBC agreed to pay $6.3 billion for a 51% stake in Korea Exchange Bank. Singapore Air and Temasek agreed to pay $900 million to purchase a stake in China Eastern Air.

[R]10:00AM New York, 10:00PM Hong Kong – In cautious Asian markets trading local deal makings dominated news. Singapore plans to invest $900 million in China Eastern Air.[/R]

Asian markets traded with a declining bias on thin volume. Shanghai led the region with a gain of 2% followed by Indonesia with a rise of 0.9% and increases of 0.85% in Thailand, 0.7% in India, and 0.4% in Korea and Australia. Hong Kong and Japan led the decliners with a loss of 0.3% followed by losses of 0.2% in Singapore and 0.02% in Taiwan.

Economy in South Korea expanded at 1.8% in the second quarter according to Bank of Korea. Export driven economy was supported by rising and stable orders from China and other nations in Europe and Asia. The slowdown in the U.S. housing market has not affected Korean economic growth. Exports in the quarter rose 5.2% and private consumption increased 0.8%. Construction fell 1.4% but service sector expanded at 1.3%. Strong gains in the financial markets lifted the insurance and financial service sector by 5.2%. Manufacturing expanded at 3.6% on sharp rise in orders for shipping heavy machineries.

HSBC has agreed to pay $6.3 billion for a 51% stake in Korea Exchange Bank. The sixth largest bank in the Korea with more than 5 million customers and nearly 350 branches was rumored as a takeover target for months. The recent rise in consumer spending and strong financial markets had bid up the bank’s valuation. Citigroup paid $3.4 billion for Koram Bank in 2004. HSBC offer is 24% higher from the closing price of the bank’s stock and plans to keep the bank name and its listing on the Seoul exchange.

Singapore Airlines and sovereign investment funds of Singapore Temasek agreed to pay $918 million for a stake of 24% in China Eastern Air. The Chinese airline had suffered a string of losses for the last two years and was looking for capital infusion. The airlines in the past has struggled with torrid pace of growth and lacked international management capabilities. The capital infusion from Singapore government fund and management expertise from Singapore Air will help the airline to return to profitability by the end of the next year.


[R]7:00AM New York, 8:00PM Tokyo - Japanese shares fell after weak company expenditure data drew out investor confidence. Tax collection in Japan jumped 34% in July. Sony plans to list its subsidiary on Tokyo Stock Exchange in October.[/R]

Japanese stocks edged lower dragged by weak companies’ spending statistics. Tokyo lost 0.3% in mixed trading, shedding off gains of 2.6% reported Friday. Of the 225 Nikkei stocks 129 ended down, 88 gained while 8 remained unchanged. Nearly 2 trillion yen worth of shares changed hands. Of the index shares, 23 gained over 2%.

In Tokyo trading Nikkei 225 shed 0.27% or 44.16 to 16,254.93 after Finance Ministry data showed Monday capital spending by Japanese firms between April and June fell 5% from a year ago. The Ministry said manufacturers spent 12% more on plant and equipment in the last 12 months. Non-manufacturers spent 13.1% less during the review period. In the second quarter the aggregate corporate pre-tax profits rose 12%, those for manufacturers and non-producers increased 17.3% and 8% respectively.

The companies’ data also weakened the yen to 115.97 to one dollar, down from around 115.77 in the morning trade, pushing exporters marginally higher.

Japanese Finance Ministry reported that tax revenue expanded 34% in July to 4.7 trillion yen from a year earlier while income tax revenue jumped 76% to 2.8 trillion yen. Corporate tax revenues fell 38.2% to 120.38 billion yen, while consumption tax revenues lifted up 2.3% to 906.81 billion yen. Last week, Japan proposed raising consumption tax to cover social expenses. The ministry attributed to the rise in revenue to a relatively low base a year ago. The central government then had transferred large chunk of tax collected to local authorities to improve the regional economies.

Of the Nikkei 225 stocks, industrial shares gained. Yokohama Rubber ended up 5.3% followed by Mitsubishi Materials rallying 4.04%. Mitsubishi Rajon Co closed up 3.7% while Furukawa Electrical added 3.6% and Isetan up 3.5%. Technology stocks, financial and electrical shares gained.

Of the index stocks, Resona Holdings led the decliners with a loss of 3.7% followed by declines in Shinsei Bank Ltd of 3.10%, and 2.8% in Sumitomo Trust and Banking Ltd. KAO Corp and Mitsui Chemicals ease 2.74% and 2.7% respectively. Financials, Softbank Corp, Credit Saison Co, Shizuoka Bank, Chiba Bank Ltd and Mizuho Trust & Banking Co dropped over 1% each.

Sony Corp ended up 0.4% after Japanese media reported Monday that the technology group in October is planning to list Sony Financial Holdings Inc, on the Tokyo Stock Exchange''s First Section. The company plans to offer 30% to public shareholders in the estimated around 300 billion yen.


French automaker Renault SA and Nissan Motor Co group said Saturday that they plan to construct an automobile manufacturing plant in Morocco with an annual capacity of 400,000 vehicles. The joint venture plans to invest nearly $1.2 billion.

Morocco''s Prime Minister Driss Jettou and President and chief executive officer of Renault and Nissan, Carlos Ghosn, signed a memorandum of understanding Saturday for the creation of a new industrial complex in the Tangier region of North Morocco, the group said in a press release. Nissan Motor Co closed down 0.2% in Tokyo.