Like the mariners of ancient Greece lured to their deaths by the beguiling song of the Sirens, international banks increasingly appear mesmerized by the call to invest in China's state-owned banking system.
The latest international bank to answer the call is Bank of America, which announced it was parting with a total of $3 billion to purchase a 9% stake in China Construction Bank, China's second-largest lender.
At first blush, it is difficult to know what to make of this move. BoA wields considerable weight in the US but in Asia it is poorly represented. In fact, it has spent the last few years retreating from the region. In the press conference to announce the deal, BoA CEO Kenneth Lewis talked of the "value in combining [CCB's] local knowledge and distribution with our product expertise, technology and experience".
True, the deal makes sense on paper, but all of the risk is in the execution. Initial market reaction was mildly positive. One analyst conceded that the deal gives BoA entry into the world's fastest-growing economy but also brings some serious risks. Another noted that the deal is not of much material significance to BoA, but provides a good way to get exposure to upside without betting the ranch.