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ICBC: benifit from Chinese economy?

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Last week, an American friends asked me about the booming Chinese eocnomy and how to benifit from it. There are many Chinese ADRs in listed in the US market these days, but I don’t think they are suitable for most individual investors (they are for the bolder speculators only 🙂

ICBC deposite book

ICBC, Industrial and Commercial Bank of China, 中国工商银行 or 工行 (Chinese like abbreviation too). I am using Buffett’s rules of thumb to analyze ICBC. The rules are: business is understandble, business has a moat, sound management and attractive price.

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ICBC released year 2007 results

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ICBC, Industrial and Commercial Bank of China, the largest bank in China (and arguably in the world), announced its year 2007 results recently. Here is the webcast (good stuff). And quote the Reuters news: ICBC earned 81.52 billion yuan ($11.56 billion) in net profit in 2007, compared with 49.3 billion yuan in 2006, a 64.9% increase.

Notes from webcast Q&A
1) Money management (fees) will not decrease as A share market goes down. There is potential in corporate customers; new products.

2) Subprime exposure was not significant. ICBC invested much more foreign currencies in US treasuries.

3) Credit risk, non-performing loan. Property dev loan 7%, personal mortgage 15%.

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ICBC the biggest bank

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Yesterday, ICBC, Industrial and Commerce Bank of China (6001398.SS), went up 0.57 (just one cent shy of 10%), and closed at 6.37 Yuan. With that price, ICBC exceeded Citibank and became the world largest bank (market cap wise), and closes in Microsoft in terms of market cap (bloomberg).

I remember last time ICBC closed in Citibank was 3 or 4 months ago, but this time it has more sustance (I mean fundamental, or earnings). Chinese banks, along with real estate developers, are on the fire lately and people attribute that to:

1) The rise of the Yuan.

2) The continuing growth of domestic economy, along with rising CPI (inflation) and rising property value. The actual bank interest rate is negative if you consider the inflation (4%).

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