Figures from HSBC indicate that one of China’s big six state-owned banks is still grossly undervalued by the market.
HSBC’s latest annual report implies that Bank of Communications (BOCOM) is worth over USD$110 billion – more than twice the Hong Kong and Shanghai-listed bank’s market capitalisation of just above $50 billion.
HSBC is the second-largest stakeholder in BOCOM after the Chinese government, and runs a technical cooperation program which involves seconding its staff to the Shanghai-headquartered lender.
HSBC said its internal modelling gave its 19.03% stake in BOCOM a value of $21.5 billion, implying a total value of over $113 billion.
“Our discussions and focus on assumptions was driven by consideration of the current levels of uncertainty due to the impact of China-U.S. trade tensions, and the overall outlook for the Chinese banking market, and the broader Chinese economy,” said HSBC in its annual report.
BOCOM Hong Kong-listed stocks have fallen 6% since the start of the year, after posting a 9% decline 2019.