Archer Daniels Midland owes its shareholders a better explanation of why it has invested in a Chinese bank.

It would be questionable enough for another bank to buy into the Agricultural Bank of China flotation, as Standard Chartered is reported to have done. But at least there is some defence of a potential cross-fertilization between two business of the same species.

For an agribusiness group such as ADM, the decision smacks of desperation. Of a willingness to pay a high price to avoid missing out on China. 

Questionable investment

It is certainly hard to justify ADM's decision on pure investment grounds. Sure, the likes of Goldman Sachs and HSBC have made big profits on their stakes in Chinese banks. But they got in before prices soared.

Chinese banks now have fuller looking valuations, meaning the upside looks smaller. Meanwhile, the downside looks bigger, now that the country's economy is starting to look out of breath. Bank loan books in China have yet to receive the forensic examination that their recession-dented peers received in the West.

Besides, ADM should remember it is not a fund. If its shareholders want to invest in Chinese banks, they can do so themselves.

'Vantage point'

It may be that ADM must be expecting something else out of the deal.  Such as leverage for opening Chinese doors.

Patricia Woertz, the company's chairman and chief executive, talks of the somewhat woolly benefit of an "important vantage point to identify and act on emerging opportunities".

But it's not clear why she needs an outlay of $100m to get decent Chinese business ideas, especially when it should already be getting some perspective through its Wilmar links. 

Besides it is not clear how Agricultural Bank of China, or AgBank, is best placed in that regard.

Sure, the bank should have its finger on the pulse of Chinese lending. But its customers are hardly likely to stick around for long if they feel that any really useful information, the confidential stuff, is being leaked to Ms Woertz.

Time to act 

The best thing that can be said for the investment is that it is limited to $100m.

That's relatively small in terms of ADM, a company with a market value of $16.6bn, and comfortably low borrowings.

But it is enough to warrant shareholders demanding an explanation from Ms Woertz, and a target for the return she expects on the investment, if only to make sure she thinks twice before coming up with an ever zanier scheme.