Patience is the key to reap the rewards from the Asian tiger
THE Asian tiger may have lost some of its growl with the US Conference Board cutting its growth forecast for China just two days ago, but Standard Chartered is betting on a revival.
This agreement is StanChart’s first significant partnership with a big Chinese lender and brings the UK-based bank into line with global rivals such as HSBC that have already established tie-ups on the mainland. As a cornerstone investor the FTSE 100-listed bank will gain a stronger foothold in Asia and is seeking to benefit from its Chinese partner’s vast client-base on the mainland.
But history doesn’t necessarily bode well. While many lenders have aquired large minority equity stakes in a bid to cement their Chinese alliances, HSBC and Bank of America in Bank of Communications and China Construction Bank respectively, such strategic partnerships often turn out to be purely “cosmetic” and amounting to little in practice.
Yes, the $500m capital commitment is a good start, but without a proper working relationship it will mean little. AgBank has long been considered the weakest of China’s four big banks due to a large legacy of bad loans. And for StanChart coming late to the game could mean any rewards are equally slow in coming. Yesterday’s 1.1 per cent share price fall to 1,641p suggests investors expect the payback to be well into the future. Patience is required.