Investment Bank analysts divided
Bank of America Corp. ’s $ 3 billion to acquire a stake in China Construction Bank has a mixed reaction Friday as a courageous step in a rapidly expanding market, but may also risk venture that could lead to large losses .
In announcing the move Thursday, Ken Lewis, chief of the nation’s third largest bank, presented as a logical response to the meaning of the global economy.
“It only makes sense if you click the tap water in economic growth, to consider an investment in China,” said Lewis, Chairman of the Charlotte-based Bank of America.
Under its agreement with the Chinese state-China Construction Bank of America rose from 3 billion to $ 9 per cent of the participation of the Bank _ the simplest stock in a Chinese bank by a foreign bank.
Action by the Bank of America rose 21 cents to close at $ 46.64 on the New York Stock Exchange, where they acted in a field of 52 weeks of $ 41.28 to $ 47.47.
However, the industry is a source of concern to analysts of the Chinese bank “questionable” and noted that other American banks have declined, even for investments.
“Of course, the world has changed, China has changed, and the China Construction Bank has changed,” Richard Bove, an analyst at Punk, Brick & Co. letters to clients Friday. “That may be as bright as a investment. On the other hand, it could also be a source of more foreign losses to the Bank of America. ”
In an interview, Bove noted that the move is an abandonment of domestic policy that the Bank’s strategy since the predecessor of the nation has resulted in huge losses bank in Brazil and Argentina in the late 1980.
“(Former director) Hugh McColl was absolutely opposed to foreign investment, having been somewhat complicated by the crisis in Latin America,” said Bove. “While the Bank of America, it is foreign investment is a shock.”
Other banks have investments similar to China’s growth. HSBC Holdings plc, Citigroup Inc and the International Finance Corp. arm _ World Bank loans _ have followed the development of partnerships potentially lucrative Chinese market.
“This investment is intended to create an advantage for long-term partnerships with banks to better placed China, which is one of the strongest growing economies in the world with 1.3 billion consumers,” said Lewis.
Bank of America also said it has the opportunity to expand their participation in the China Construction 19.9 per cent between now and 2011.
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