Bank of China Unit Jumps to Record on Asset-Sale, Asean Plan

Updated on

BOC Hong Kong Holdings Ltd. shares jumped to a record after the lender said that it plans to sell its Nanyang Commercial Bank Ltd. unit and buy banking operations and assets in Southeast Asia from its parent.

Shares of the firm, controlled by Bank of China Ltd., surged as much as 8.3 percent to HK$33.20 in Hong Kong on Friday after the statement on Thursday. The stock was up 6.5 percent as of 10:47 a.m. local time.

BOC Hong Kong is seeking about $5 billion for Nanyang in a sales process focused on attracting a Chinese buyer, people familiar with the matter said in March. Meanwhile, adding assets and operations in countries in the Association of Southeast Asian Nations may enable the unit to lead the group’s push in the region.

“It makes strategic sense for the group to use BOC Hong Kong to expand into the Asean region,” Barclays Plc analyst Sharnie Wong wrote in a note. The firm has “sizable” funding available for Southeast Asian loans and regulatory processes are “more straightforward” in Hong Kong, Wong said.

Bank of China has subsidiaries in Thailand and Malaysia as well as branches in Singapore, Indonesia, Vietnam and the Philippines. It has three outlets in Thailand, eight each in Malaysia and Singapore and nine in Indonesia, Wong said.

Long-Term Strategy

The sale of Nanyang would aid the “long-term development strategy of the group in Hong Kong” and enable a better allocation of resources, the companies said in a joint statement on Thursday, without giving a timetable or naming potential buyers.

The bank would prefer Chinese purchasers for Nanyang, as they might benefit more from cross-border business ties, and the state-backed lender doesn’t want to be perceived by the government as selling on the cheap to foreign buyers, people familiar with the matter said in March.

Hong Kong-based Nanyang had 42 branches in the city and 14 in mainland China at the end of 2013, with HK$280.4 billion ($36.2 billion) of consolidated assets, according to its annual report.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE