China: Bank of China
Operating improvement in mainland may offset subprime loss; we upgrade the H-share to Neutral
We upgrade BOC-H to Neutral, in light of the widened valuation gap with its peers and potential narrower A-H valuation gap going forward. We believe market concerns on subprime woes have retreated, although have not been entirely dismissed.
South Korea: Korea Investment Holdings (Overweight)
Negatives are priced in; we reiterate OW—SOTP valuation included
We view recent share price weakness as a good buying opportunity: Since June-07 KIH’s share price has underperformed the KOSPI and Korea securities index by 21% and 28% respectively. We believe the underperformance is largely due to: (1) KIH’s weakening mutual fund sales growth; and (2) lack of share price catalysts from non-operational drivers such as M&A of regional banks and life insurers. We believe the above negatives are fully priced into the stock and the recent weakness provides a good buying opportunity.
South Korea: Mirae Asset Securities (Overweight)
We remove the stock from AFL, but remain Overweight
We remove Mirae Asset Securities (MAS) from our Asia Analysts’ Focus List (AFL): As MAS’s share price has soared to our previous price target, we remove the stock from our AFL. The stock has outperformed KOSPI by 25% over the past month.
Australia: Banking Sector
Labour Unlikely To Budge Four Pillars
In recent times BOQ CEO David Liddy (refer First To Market March 20), WBC CEO David Morgan (refer Reuters September 12) and ANZ CEO John McFarlane (refer Dow Jones September 11) have all called for an end to the existing “4 Pillars” prohibition on mergers between Australia’s 4 major banks. We believe any expectation of accelerating M&A activity is overdone and continually speculated upon by banks given their respective interests.
Australia: Macquarie Bank (Overweight)
MBL Model Holding Up
Perceptions that prevailing credit market conditions provide a fundamental challenge to the MBL business model are being addressed by some recent transactions. Specifically: 1. While MBL acknowledge that velocity of capital has slowed, deals are still being done. MBL have recently been announced as the highest bidder for a S$2bn (A$1.5bn) land parcel at Marina View in Singapore, and have lodged a Summary Of Proposed Investment for a US$1bn Macquarie India Infrastructure Opportunities Fund. Media reports also indicate that MBL are currently assessing a KRW20tr (A$24bn) project to develop a business district in central Seoul, South Korea (Reuters 21 Sept), and are sounding out interest for a A$20bn takeover of BXB in conjunction with AIO (AFR 26 Sept).
Australia: National Australia Bank (Underweight)
Senior Executive Changes Open Path For Succession
Yesterday, NAB announced several changes to key management positions: (i) Michael Ullmer, current CFO, has been appointed Deputy CEO, (ii) Mark Joiner, current General Manager Development and New Business, has been appointed CFO, (iii) George Frazis, current General Manager Business and Private Banking, will replace Mark Joiner as General Manager Development and New Business.
