Econ 310 Section 2 Financial Institution in H.K. Group 7 Member List Mak Ching Yue 033008 Law Kin Shek 033036 Li Ka Kit 033085 Wong Hiu Tung 033086 Luk Chun Hung 033096 Po Ka Ho 033220

Investment Bank – Morgan Stanley I.P.O of China Construction Bank

Introduction Main function of Morgan Stanley Underwriting and distributing new security issues I.P.O of China Construction Bank Schedule of procedure Aries

IPO procedure of CCB In 2004, Several investment banks plan proposal to become the underwriter 17/3/2005, Morgan Stanley approach the management of CCB Aries

IPO procedure of CCB 17-June-2005 Citigroup, Morgan Stanley, JP Morgan, UBS etc. discussed with CCB. Morgan Stanley uses US$30 billion Temasek Holdings uses US$15 billion & buy US$10 billion in IPO Morgan Stanley Won!! Kenneth

IPO procedure of CCB From September, October 2005 Road Show Price: $1.8--$2.15 (Initially) Popular!! Kenneth

IPO procedure of CCB 10/10/2005: CCB decided to raise the price range to $1.9-$2.4 dollar per share many investment bank disagree the price range as it is too high suitable price should be $2.1 Ryan

IPO procedure of CCB 14/10/2005: the investment banks accept the change Prepare the document Help distributing them to the bank such as HSBC, CCB, etc Ryan

IPO procedure of CCB 19/10/2005: Morgan Stanley and the other underwriters discuss about the last price of CCB CCB wanted to set the price at $2.4 Investment bank deem that the price should be lower The last price is $2.35 per share Ryan

IPO procedure of CCB Announce the offer price Basis of allotment 26-Oct-2005 Announce the offer price Basis of allotment Franco

Basis of allotment Dispatch of shares and refund of cheques Number of shares applied for: Number of applications: Basis of allotment: 1,000 42,111 1,000 shares 2,000 36,630 20,000 20,506 2,000 shares + 7777 out of 10253 to receive additional 1,000 shares 600,000,000 1 14,904,000 shares Dispatch of shares and refund of cheques Franco

IPO procedure of CCB 27-10-2005 The first trading day of CCB Access the stabilization period To prevent and retard decline in the market price Franco

Benefits Commission Gross Spread Right of buying options Increase their brand name Cyrus

Commission 2.5% of the offer price payable for the Hong Kong Offer Shares 1,324,298,000 x $2.35 x 2.5% $77,802,507.5 Cyrus

Gross Spread 1.38-1.44 2.35 Cyrus

Right of buying options Morgan Stanley can have the right of buying options before 2011 in the price of 2.35 the P/B value is over 2.4 times the price is about $2.85 1 billion US dollars. Cyrus

Increase their brand name CCB is a famous bank in China More people know about the Morgan Stanley Goodwill of the investment bank Cyrus

Risk The process of underwriting a stock or bond issue requires that the securities firm purchase the entire issue at a predetermined price and then resell it in the market. Taken on the risk of distributing the securities Calvin

Risk Although the investment bank do not need to end up holding some securities themselves. But they cannot get any commission and the cost of preparing has already paid. So that invetsment bank will have a risk to lose. Calvin

Risk Stabilization is a practice used by underwriters in some markets to facilitate the distribution of securities The underwriters may bid for, or purchase, the securities in the secondary market, during a specified period of time Calvin

Risk Prevent any decline in the market price of the securities below the offer price Investment bank need to buy the share in the market Calvin

Question Time (M.C.) Cyrus

1.) What is the final listing price of China Construction Bank? D.) $2.300 E.) None of the above

2.) When is the stable time of the China Construction Bank until.... A.) 18-Oct-2005 B.) 18-Nov-2005 C.) 19-Nov-2005 D.) 30-Nov-2005 E.) None of the above

3.) What is the main investment bank of China Construction Bank? A.) Hong Kong and Shanghai Bank B.) Citigroup C.) JP Morgan D.) Credit Swiss First Boston E.) None of the above

The End