THE Dao Heng Bank $1.149 billion placement and subscription of shares announcement on Thursday night means the bank is back on the acquisition trail, say banking sector watchers. Capital market activity, taken together with Thursday night's frenetic activity by dealers at the underwriter HG Asia, means the Guoco-owned bank has raised $3.7 billion in six months. The fund-raising means the bank has now fully absorbed the last acquisition of Overseas Trust Bank from the Government for $4.46 billion in 1993. This followed the purchase and merger of Dao Heng Bank with Hang Lung Bank between 1989 and 1990. The bank is the fourth largest in the territory in branch network terms, with more than 90 outlets, and is fifth in assets amounting to an estimated $80 billion. Analysts are saying loan volumes at the bank are probably healthy and expansion is at the front of the minds of the directors again. Given that banks in the territory are said to be flooded with dollars and are desperate to lend, the view being taken on Dao Heng's capital raising is that the money is not being raised to support a big growth in loan business in Hong Kong. The bank stated in its placement disclosure that it is interested in the Philippines. Directors have been telling analysts they want to build up a business in the Philippines and there are plans for two branches there in the next two years. Given the bank's strength in Hong Kong and the poor state of loan demand, expansion elsewhere in the region has to be on the cards. In 1988 the group bought 51 per cent of Singapore-listed First Capital Corporation, a property developer and manufacturer with a growing financial services business. Trying to build a business in the Philippines from a green field start is regarded by analysts as an unlikely strategy for the bank and $3.7 billion seems a lot to open two branches. They conclude an acquisition is just round the corner. Dao Heng's share price is not expected to suffer much from the placement as the pricing of the issue came in a period when the listed shares have slipped from $29 to $27. This meant the discount offered on the issued shares could be kept low, given that the fair value level is being taken by the marketplace at $29.30. The takers of the shares were happy, nevertheless, as the pricing offers the potential of an additional 10 per cent upside on a fair value basis.