Ag Bank of China IPO: bull case, bear case

Posted in :

Reading Time: < 1 minute

Business week: Summary Box: China’s AgBank IPO nabs $19.2 billion.

Wiki; Official web site of Ag Bank China’s (ABC, 中国农业银行股份有限公司).

(source: ForeignHR)

Bear case
Ag bank of China primarily serves the less-developed regions and people in China: the rural areas, the villages, the farmers and peasants, the agriculture related business. Since the founding of People’s Republic (and Ag bank shortly after), farm produce price has been kept artificially low by the central government (in a way subsidize other industries), and since 1978 the reform of economy, the situation has improved, but the economy gap between rural and urban has increased in last 30 years.

Bull case

ABC boasts more than 300 millions of customers, more than the US population. It has 24,000 branches, also the most in the world.

China central government has realized the widening gap between rural and urban areas, the gap between middle/west the coast areas, and are working on the narrowing the gap, by the way of better policy and more investments (including infrastructure). Couple examples on this one: the setup of Chongqing city as provincial level (same as Beijing and Shanghai) in recent years; the (potential) move of manufacturing plants from coastal area to inland.

%d bloggers like this: