Bank of China Halted in Hong Kong After Report on Stock Offer
Bank of China President Li Lihui speaks during a news conference in Hong Kong. Photographer: Jerome Favre/Bloomberg
July 2 (Bloomberg) -- Jerry Lou, China strategist at Morgan Stanley, talks with Bloomberg's Susan about his investment strategy for Chinese stocks. Lou, speaking from Singapore, also discusses China's shift in its currency policy, and Agricultural Bank of China Ltd.'s planned initial public offering. (Source: Bloomberg)
Bank of China Ltd. shares were halted from trading in Hong Kong and Shanghai after a report said the nation’s third-largest lender by market value plans to raise as much as 60 billion yuan ($8.9 billion) in a rights offer.
The Beijing-based lender will sell the shares in Shanghai and Hong Kong, Caixin Online reported yesterday, without citing anyone. Bank of China’s board approved the sale of stock to existing shareholders on June 30 and the company will make an announcement today, Caixin said.
An offering would add to as much as $45.6 billion in fundraising announced by China’s biggest banks and come amid the longest losing streak in the Hang Seng China Enterprises Index in a decade. Agricultural Bank of China Ltd., the nation’s largest lender by customers, is in the midst of a $20.1 billion initial public offering in Shanghai and Hong Kong.
A sale by Bank of China would “damage market sentiment and banking shares further because we’ve already been flooded by share offerings,” said Tang Yayun, a Shanghai-based analyst at Northeast Securities Co. “This is a surprise given that they just completed the bond sale.”
Bank of China shares were suspended in Hong Kong before trading started today. The Shanghai-traded stock climbed 0.3 percent before being halted at 1:30 p.m. today. The lender said in a statement it plans to release “price-sensitive” information, without giving further details.
Caixin is a media group co-founded by Hu Shuli, the former founding editor of Caijing Magazine, the Chinese financial journal that built a reputation for investigative reporting.
Capital Ratio
Shares of Bank of China have fallen 5.5 percent this year in Hong Kong, outperforming the 8 percent drop in the benchmark Hang Seng Index. Chinese banks are lining up to sell shares to replenish capital eroded by record lending in 2009.
In March, Bank of China won investor approval to sell shares equivalent to as much as 20 percent of outstanding stock in Hong Kong or Shanghai, or in both markets. President Li Lihui told investors in January the bank favored a Hong Kong sale.
The lender’s capital adequacy ratio fell to 11.09 percent as of March 31, below the minimum 11.5 percent required by the China Banking Regulatory Commission. Bank of China, which granted more loans than any local rival last year, in June completed the sale of 40 billion yuan of six-year bonds that can be converted into shares.
Central Huijin Investment Co., which owns 67.5 percent of Bank of China, did not take part in the bond sale. Huijin, which owns stakes in China’s largest financial institutions on behalf of the government, said in April it will participate in fundraising by Bank of China, Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp.
Credit Boom
China’s government has stepped up measures to drain liquidity on concern that last year’s credit boom will create an asset bubble. Policy makers aim to cap new loans at 7.5 trillion yuan this year, down 22 percent from 2009, and have told banks to set aside more deposits as reserves three times since Jan. 1.
ICBC, Construction Bank, Bank of China and Bank of Communications Co., the nation’s four-largest publicly traded banks, face a capital shortfall of about $70 billion as they seek to comply with regulatory requirements and meet loan demand, ICBC President Yang Kaisheng wrote in an April article.
ICBC, the world’s largest lender by market value, may sell 25 billion yuan of convertible bonds as soon as August, a person familiar with the matter said last month. The bank also has a general mandate to sell stock equivalent to as much as 20 percent of outstanding shares in Shanghai and Hong Kong.
In addition, ICBC plans to sell 22 billion yuan of subordinated bonds as soon as next month to retire debt sold in 2005, a person with knowledge of the matter said today.
Beijing-based Construction Bank, the world’s second-largest by market value, last week won shareholder approval to raise up to 75 billion yuan in a rights offer.
--Luo Jun, with assistance from To contact Bloomberg News Henry Sanderson in Beijing. Editors: Joost Akkermans, James Gunsalus
To contact Bloomberg News staff of this story: Luo Jun in Shanghai at +8621-6104-7021 or jluo6@bloomberg.net
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