Global Capital Markets Read Closing Case: Industrial and Commercial Bank of China on page 2. Write a

Global Capital Markets
Read Closing Case:
Industrial and Commercial Bank of China on page 2. Write a 2 page paper,
excluding the title and reference pages, with a detailed analysis that
addresses the following:

Examine why ICBC felt the need to issue equity in
markets outside of China. Describe the advantages and disadvantages
of such a move.
Determine the attraction of the ICBC in regards to
providing exchange listings to foreign investors. Provide examples of why
investors would be interested.
Summarize the risks for a foreigner associated with
investing in ICBC. Provide examples of possible risks.

In addition to the required text, provide at least one
additional scholarly source to support your point. Your paper should be
formatted in APA style.

Industrial and Commercial Bank of China
In October 2006, the Industrial and Commercial Bank of
China, or ICBC, successfully completed the world’s larg- est ever initial
public offering (IPO), raising some $21 billion. It beat Japan’s 1998 IPO of
NTT DoCoMo by a wide margin to earn a place in the record books (NTT raised
$18.4 billion in its IPO). The ICBC offering fol- lowed the IPOs of a number of
other Chinese banks and corporations in recent years. Indeed, Chinese
enterprises have been regularly tapping global capital markets for the last
decade, as the Chinese have sought to fortify the balance sheets of the
country’s largest companies, to im- prove corporate governance and
transparency, and to give China’s industry leaders global recognition. Since
2000, Chinese companies have raised more than $100 billion from the equity
markets. About half of that came in 2005 and 2006, largely from the country’s
biggest banks. Shares sold by Chinese companies are also accounting for a
greater share of global equity sales—around 10 percent in 2006 compared to 2.8
percent in 2001, surpassing the total amount raised by companies in the world’s
second largest economy, Japan.
To raise this amount of capital, Chinese corporations have
been aggressively courting international investors. In the case of ICBC, it
simultaneously listed its IPO shares on the Shanghai stock exchange and the
Hong Kong exchange. The rationale for the Hong Kong list- ing was that
regulations in Hong Kong are in accordance with international standards, while
those in Shanghai have some way to go. By listing in Hong Kong, ICBC signaled
to potential investors that it would adhere to the strict reporting and
governance standards expected of the top global companies.
The ICBC listing attracted considerable interest from
foreign investors, who saw it as a way to invest in the Chinese economy. ICBC
has a nationwide bank net- work of more than 18,000, the largest in the nation.
It claims 2.5 million corporate customers and 150 million personal accounts.
Some 1,000 institutions from across the globe reportedly bid for shares in the
IPO. Total or- ders from these institutions were equivalent to 40 times the
amount of stock offered for sale. In other words, the offering was massively
oversubscribed. Indeed, the issue generated total demand of some $430 billion,
almost twice the value of Citicorp, the world’s largest bank by market
capitalization. The listing on Hong Kong attracted some $350 billion in orders
from global inves- tors, more than any other offering in Hong Kong’s history.
The domestic portion of the stock sales, through the Shanghai exchange,
attracted some $80 billion in orders. This massive oversubscription enabled
ICBC to raise the issuing price for its shares and reap some $2 bil- lion more
than initially planned.