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

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

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

4. 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

5. 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

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

7. 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

8. 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

9. 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

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

11. 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 out of to receive additional 1,000 shares
600,000,000 1
14,904,000 shares
Dispatch of shares and refund of cheques
Franco

12. 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

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

17. 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

18. Gross Spread
2.35
Cyrus

19. 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

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

21. 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

22. 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

23. 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

24. 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

26. Question Time (M.C.)
Cyrus

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

28. 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

29. 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

30. The End