Jan. 14 (Bloomberg) -- Chinese banks rose in Hong Kong after Royal Bank of Scotland Plc, the biggest government- controlled bank in the U.K., sold its stake in Bank of China Ltd., triggering some buying after the overhang was removed.

Bank of China, China’s third-largest bank, rose as much as 6.5 percent and ended 2.7 percent higher at HK$1.90. China Construction Bank Corp. gained 2.9 percent to close at HK$3.80, while Bank of Communications Ltd. climbed 3.1 percent.

RBS sold 10.8 billion shares for HK$1.71 apiece, or about 7.6 percent less than Bank of China’s closing price in Hong Kong yesterday, to raise capital depleted by writedowns, said three people familiar with the sale. The Edinburgh-based lender follows UBS AG and Bank of America Corp. in paring holdings in Chinese banks after lockup periods for strategic investors end and as financial firms repair their balance sheets.

“Mature investors know it’s a good opportunity to buy Chinese banks instead of selling them,” said Zhang Xi, a Beijing-based analyst at China Galaxy Securities Co. “Some investors have overreacted to selling by foreign strategic investors and neglected the banks’ long-term profitability.”

Bank of China said in a statement today the stake sale will not affect its operations and financial conditions and the Chinese bank will continue business cooperation with RBS.

HSBC Holdings Plc, Europe’s largest bank by market value, has said it has “no intention” of reducing its 19 percent stake in Bank of Communications. Goldman Sachs Group Inc. still owns 16.5 billion shares in Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, and has agreed not to sell the shares until after April 28.

Profit Gains

Bank of Nanjing Co., a Chinese bank partly owned by BNP Paribas SA, said yesterday that 2008 profit may have risen 70 percent on higher interest income and fees. The stock rose 5.4 percent today in Shanghai.

Hong Kong billionaire Li Ka-shing raised $511 million selling shares in Bank of China on Jan. 7 after Zurich-based UBS sold about $900 million of shares in the Chinese lender. Separately, Bank of America sold $2.8 billion of shares in China Construction Bank last week.

Bank of China’s Hong Kong-traded shares have fallen 48 percent in the past year, paring the value of RBS’s stake, as the bank racked up $3.7 billion of losses from securities linked to U.S. home loans, more than any other Chinese lender.

To contact the reporter for this story: Zhang Dingmin in Beijing at Dzhang14@bloomberg.net

Last Updated: January 14, 2009 04:03 EST