Posted on 01/21/2008 3:19:09 AM PST by TigerLikesRooster
Bank of China shares fall sharply on worries of subprime losses
Mon Jan 21, 2:06 AM ET
Shares in Bank of China (BOC) fell sharply Monday on reports it might post lower profits or even a loss when announcing 2007 results in April, due to writedowns on struggling subprime investments.
The bank may announce a significant writedown on its 7.95 billion US dollars of investments in securities linked to US subprime mortgages, the South China Morning Post reported Monday, citing unnamed mainland banking sources.
Senior banking regulators have already warned the mainland leadership that BOC, as well as the Industrial and Commercial Bank of China and China Construction Bank, would have to make provisions for all their subprime-linked assets, the report added.
BOC spokesman Wang Zhaowen declined comment on the report.
Hong Kong-listed shares in BOC fell 4.7 percent in morning trade Monday on the report. At the end of the session, shares were off 0.17 dollars at 3.43.
BOC, which has the biggest reported subprime exposure among Chinese banks, posted a 45.5 billion yuan (6.3 billion US) net profit for the first nine months of 2007, 40 percent more than a year before.
In September, China's second-biggest bank said its portfolio of investments linked to the subprime market had been cut to 7.95 billion dollars from 9.65 billion dollars in August.
It set aside 322 million dollars for possible losses related to the assets.
However, subprime securities took a further hit in the fourth quarter, forcing several top US banks to post record losses for the period.
Lee Yuk-kei, an analyst Core Pacific-Yamaichi International, said he expects the bank to announce a writedown but still increase its profit over 2006.
"We estimate that BOC will have to set aside up to 2.0 billion US dollars for its subprime exposure for the whole of last year," Lee said.
"We expect BOC's 2007 earnings to grow 20 percent year-on-year to some 50 billion yuan, but the figure would obviously be much higher if not for the amount that it will have to set aside for its subprime investments."
Lee said he expected BOC to set aside an additional 6.0 billion yuan of provisions this year against its subprime exposure.
"This stock will likely come under selling pressure in the coming months as a result of investor worries that its performance will continue to be dragged down by the need to set aside more provisions," he said.
U.S. economy will drag China's into the bottom. China would fall harder and land on the bottom first, and U.S. will pile on it.
So much for the financial “experts,” who insisted they would invest in foreign exchanges because they would not be affected by a US recession. Without the US driving foreign trade, we are back in 1970.
We can only hope America-haters such as Soros will lose their shorts.
No way man, the “realist” gurus on FR are right. China owns America and will only own it more when this is all said and done. We’re through, stick a fork in us. All I can hope is that we learned from Britain’s decades of first denying and the wrestling with and finally accepting their loss of great power (much less superpower) status, and that we adapt more quickly to find the right sort of niche for our tiny little country (in comparison to China and India) within 20 years or so.
I expected something like this will happen for some time. We all go down. Nobody can escape this if U.S. goes down. The difference could be that when things get cleared, U.S. may not be on the top. On the other hand, China won't be in one piece by then.
No country will be the undisputed superpower for extended period of time.
We have no shortages of pride or wishful thoughts in America, but even our experts have deficits of historical knowledge from their own fields of expertise. Contrary to what many of my slightly older Baby Boomer peers have wanted to believe for so long, Chinese people are not inherently stupid.
Well over half of the businesses in China (~ 150,000) are owned by the government. More of China’s exports go to third world countries than to the USA.
If U.S. goes down, its impact could either go directly to China or via third countries with more time delay.
Individual Chinese are not stupid. However, their collective psyche or political culture is another problem. No amount of intelligence or knowledge could be the cure for rampant greed and hubris which take the life of its own.
That is what has been happening in U.S., too.
LLS
You reckon there’s enough ‘true Americans’; that pioneer spirit left today in the younger working class? I wonder sometimes with the instant gratification mindset of the Gen X’r’s etc. A lot of kids cannot do without the cell phones an ‘in fashion’ stuff.
They own Clinton and McCain.
A while ago, a wit here on FR pretty well nailed it. China sent the US pet food laced with arsenic and lead painted toys and recieved payments in radioactive bundles of bad debt.
LOL, as people worried about foreigners taking over this country, the truth was they were only taking over bad debt.
Looks like the Chinese are getting their lessons about capitalism the hard way.
If China goes down, so will the demand for oil...followed by price. A slowdown in the Chinese economy will help the US.
I have thought of that... been depressed as to whether there are any youth to take the reigns... but then I think of the young men and women that are fighting in Afghanistan and Iraq... and I have no doubt that we have a future for a Conservative and Free America!
LLS
This is probably the tip of the iceberg of years of banking decisions affected by party connections.
Amen and may God Bless!!
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