ICBC's East Asian swap asset price falters

Although the majority of the industry estimates that ICBC (1398.HK) and the Bank of East Asia (0023.HK) Swap assets of the news on the positive impact on share prices, but two companies have not been boosted by shares, ICBC yesterday closed to 4.86 Hong Kong dollar, slightly down 1.018%　　, while the Bank of East Asia closed at HK $26.85, down 4.107%. Most analysts believe that East Asia at the cost of HK $372 million to buy ICBC's 75% stake in East Asia, making the latter a wholly-owned subsidiary, at the same time to 80.25 million Canadian dollars (HK $567 million), the sale of wholly-owned Canadian Bank of East Asia 70%, and the right to require ICBC to buy the remaining shares　　It is reported that through trading, ICBC profit of HK $34 million, while acquiring overseas assets, and then layout of the North American market, and through a buy-sell, East Asia net amount of HK $195 million. Upon completion of the transaction, ICBC and East Asia will cooperate in the operation and management of the Bank of East Asia, while East Asia will become a wholly owned subsidiary of East Asian Banks. JPMorgan expects the East Asian bank to buy and Trade East Asia to pay 1.1 times times the amount of its book value, and the valuation looks reasonable; The deal helped the Bank of East Asia strengthen its brokerage and investment banking business. The acquisition of East Asia by East Asian banks would have led to an increase of HK $0.03 per share earnings forecast for 2009 (HK $0.93).　　However, JPMorgan also noted that the sale of Canadian subsidiaries to ICBC by the Bank of East Asia would dilute overall profitability, partly offsetting the benefits of the takeover.　　Li Shaoxia, a joint director of the International Research Division of the bank, said both deals are good for ICBC, one because ICBC had built its own business as early as last year, and in addition to its investment banking international, the importance of industrial and commercial East Asia to ICBC has been greatly reduced, and the second is that ICBC is actively expanding overseas, and East Asia is providing a platform for local outlets.　　The shares of the two companies were depressed, but after the deal was disclosed, the shares of two companies did not get a boost, with ICBC trading at 4.86 Hong Kong dollar yesterday, slightly down 1.018%, while the Bank of East Asia closed at 26.85 Hong Kong dollar, down 4.107%. Merrill said it believes the market has overestimated the possibility of East Asian mergers and its recent advantages from the mainland, with its current price forecast of 21 times times the 2010 earnings ratio, the city net rate of 1.5 times times, the expected return on equity 7% to 8%, compared with Hong Kong's local counterparts, valuation is not satisfactory.　　As a result, the deal has a limited impact on East Asia's 2009 and future earnings, with a target price of HK $15. The KGI Securities Bin said that because the transaction amount is small, the news is not expected to have a big impact on profit growth, the two banks ' share prices are expected to follow the big market expectations of the rally, but the strategic restructuring message will not provide much support.