Jan. 8 (Bloomberg) -- Bank of America Corp. sold $2.8 billion of China Construction Bank Corp. shares to boost capital and Hong Kong billionaire Li Ka-shing is raising as much as $524 million in Bank of China Ltd. stock sales.

Bank of America offered 5.62 billion shares in China’s second-largest lender at HK$3.92 apiece, according to a sales document obtained by Bloomberg News. Li’s Magnitico Holdings Ltd. is selling 2 billion shares in Beijing-based Bank of China at HK$1.98 to HK$2.03 each, according to a separate sales document.

Chinese banks fell in Hong Kong trading as the transactions fueled concern other foreign investors will use their holdings to shore up balance sheets battered by the global credit-market contraction. UBS AG, Switzerland’s biggest bank, sold its entire stake in Bank of China on Dec. 31, the day a three-year “lockup period” ended.

“Investors expect more sales to come,” said James Liu, a Shanghai-based analyst at SinoPac Financial Holdings Co. “Bank of America and some other foreign strategic investors are just having too many issues on their home turf, and they have to find a quick way to raise cash.”

Bank of America, the largest U.S. bank, is trying to take advantage of almost $14 billion of paper profits from its China Construction stake after paying about $33 billion to take over Merrill Lynch & Co., the biggest financial-services acquisition announced in 2008.

‘Smart’ Decision

“It’s smart for Bank of America to take some profits,” said Sean Ryan, an analyst at Sterne Agee & Leach. “The Chinese don’t want a large part of the stake to be sold when the price of the shares has already declined significantly.”

Li’s Magnitico was part of a group of investors led by Royal Bank of Scotland Group Plc that bought 20.9 billion shares in Bank of China in 2005, before the lender went public. Magnitico owned 24 percent of the group, giving it about 5 billion Bank of China shares, according to Bloomberg calculations based on the Chinese bank’s 2006 Hong Kong initial share sale prospectus.

Bank of America fell 4 percent in New York trading, to $13.71. China Construction declined 8.8 percent in Hong Kong, the biggest drop in more than two months, while Bank of China shares closed at HK$2.14, down 3.2 percent.

2005 Investment

The Bank of America sale represents 13 percent of its stake in China Construction. The Charlotte, North Carolina-based company invested $3 billion in the Chinese lender in 2005 and has since been increasing its share. In November, Bank of America paid $7 billion to almost double its holding to 19.1 percent.

Since the initial investment, China Construction has catapulted to become the world’s second-largest bank by market value, while Bank of America ranks seventh.

China Construction declined 36 percent last year in Hong Kong, while the benchmark Hang Seng Index fell 48 percent. Bank of America shares lost two-thirds of their value during the year, prompting the company to halve its quarterly dividend to 32 cents a share.

Bank of America plans to be “a long-term and significant strategic investor in CCB,” the U.S. lender said in a November statement. The stock Bank of America bought in 2005 became eligible for sale in October, prompting analysts to suggest the U.S. lender would sell part of its stake.

‘Financial Situation’

China Construction has been notified of the transaction and understands that Bank of America sold the shares because of “its financial situation,” the Chinese firm said in a statement. The companies will continue their strategic partnership and cooperate in all business areas, China Construction said.

Merrill Lynch and UBS managed the sale.

Bank of America canceled a December offering partly because of a Chinese securities law banning investors holding more than 5 percent of a locally incorporated, publicly traded company from selling shares within six months of buying the stock, two people familiar with the matter said at the time.

The U.S. bank decided to try again on expectations the rule doesn’t apply to Chinese shares traded in Hong Kong, a person with knowledge of the matter said, declining to be identified. Bank of America spokesman Scott Silvestri declined to comment on the latest sale.

Temasek’s Stake

Singapore’s Temasek Holdings Pte can sell its 9.9 billion China Construction shares anytime, because its lockup agreement ended in August, according to Construction Bank’s listing document.

Royal Bank of Scotland, controlled by the U.K. government after a bailout, owns 20.9 billion shares in Bank of China, or 8.5 percent, while Temasek owns 11.9 billion shares, or 4.8 percent. Their stakes can be sold after a Dec. 30 lockup ended, according to the Chinese bank’s listing prospectus.

Royal Bank is in discussions to sell its stake, the Financial Times reported, citing a person familiar with the situation.

Goldman Sachs Group Inc. owns 16.5 billion shares in Industrial & Commercial Bank of China Ltd. and has agreed not to sell the shares until after April 28, 2009, according to the bank’s listing document.

To contact the reporters on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net; Luo Jun in Shanghai at jluo6@bloomberg.net.

Last Updated: January 7, 2009 17:11 EST