The mainland’s US$200 billion sovereign wealth fund has bought shares in the country’s three major lenders to bolster confidence after the high-profile exit from several top lenders by their foreign partners as well as fears of more sell-downs.
Responding to the news by China Investment Corp chairman Lou Jiwei, shares of Industrial and Commercial Bank of China, the country’s biggest, rose 3.61 per cent, their first gain in nine days. Bank of China climbed 4.62 per cent and China Construction Bank Corp advanced 3.71 per cent, compared with a 0.09 per cent gain in the Hang Seng Index.
“We have been increasing our holdings in the three major lenders,” said Mr. Lou in Beijing yesterday, adding that prices were not what they were concerned about.
Western nations have spent billions bailing out or even taking over their troubled financial institutions, but mainland banks are not in such dire straits.
Nevertheless, the buying support by the sovereign wealth fund could help offset pressure on mainland banks’ shares, said Lin Chaohui, an analyst with Guotai Junan Securities in Shanghai.
Share prices have been weighed down as cash-strapped foreign strategic investors have been trimming their stakes in mainland banks since the end of last month.
It is widely anticipated they will continue the share reductions in coming months as the three-year lock-up period expires.
UBS sold its entire 1.33 per cent stake in BOC last month, Bank of America Corp pared a 2.4 per cent stake in CCB last week, while Royal Bank of Scotland Group this week sold a 4.3 per cent stake in BOC for as much as HK$18.4 billion, ending a strategic investor relationship that began in 2005.
Strategic shares held by foreign investors that could be disposed of include the combined 7.2 per cent stake in ICBC held by Goldman Sachs, Allianz Group and American Express; the remaining 5.79 per cent held by Bank of America in CCB; and the remaining 3.99 per cent held by RBS and the 4.13 per cent stake of Singapore’s Temasek Holdings in BOC.
“The foreign banks selling their stakes will not have a huge impact on Chinese banks,” said Charlene Chu, a senior director of Fitch Ratings. “It’s not as if the minute the foreign investor leaves, there’s no one else there. Chinese banks can turn to others if they feel it’s necessary.”
In a bid to boost market confidence, Central Huijin Investment, a unit of CIC and the largest shareholder in the Big Three banks, spent 1.2 billion yuan (HK$1.36 billion) to raise its holdings in the A-share market between September 23 and November 28, the Shanghai Securities News reported last month.
Mr. Lou also said the sovereign fund had not pulled back from overseas markets and investment “has been continuing all the time”.
Xinhua reported on January 5 that CIC had stopped investing since September last year amid the global financial crisis and economic slowdown.
CIC was being “prudent” and had adjusted its spending plan set at the beginning of last year, vice-general manager Zhang Hongli was quoted as saying.
As the positive sentiment spilled over to the A-share market, shares in ICBC rose 2.01 per cent, BOC edged up 1.69 per cent and CCB climbed 4.05 per cent in Shanghai trading yesterday.
But Chen Ge, a fund manager at Fullgoal Fund Management in Shanghai, said he was still cautious on the bank shares as their profits were likely to shrink with the fast cooling economy.
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CIC Snaps Up Stocks in Three Major Lenders
Move to bolster confidence in banks
Jane Cai in Beijing 17 January 2009
The mainland’s US$200 billion sovereign wealth fund has bought shares in the country’s three major lenders to bolster confidence after the high-profile exit from several top lenders by their foreign partners as well as fears of more sell-downs.
Responding to the news by China Investment Corp chairman Lou Jiwei, shares of Industrial and Commercial Bank of China, the country’s biggest, rose 3.61 per cent, their first gain in nine days. Bank of China climbed 4.62 per cent and China Construction Bank Corp advanced 3.71 per cent, compared with a 0.09 per cent gain in the Hang Seng Index.
“We have been increasing our holdings in the three major lenders,” said Mr. Lou in Beijing yesterday, adding that prices were not what they were concerned about.
Western nations have spent billions bailing out or even taking over their troubled financial institutions, but mainland banks are not in such dire straits.
Nevertheless, the buying support by the sovereign wealth fund could help offset pressure on mainland banks’ shares, said Lin Chaohui, an analyst with Guotai Junan Securities in Shanghai.
Share prices have been weighed down as cash-strapped foreign strategic investors have been trimming their stakes in mainland banks since the end of last month.
It is widely anticipated they will continue the share reductions in coming months as the three-year lock-up period expires.
UBS sold its entire 1.33 per cent stake in BOC last month, Bank of America Corp pared a 2.4 per cent stake in CCB last week, while Royal Bank of Scotland Group this week sold a 4.3 per cent stake in BOC for as much as HK$18.4 billion, ending a strategic investor relationship that began in 2005.
Strategic shares held by foreign investors that could be disposed of include the combined 7.2 per cent stake in ICBC held by Goldman Sachs, Allianz Group and American Express; the remaining 5.79 per cent held by Bank of America in CCB; and the remaining 3.99 per cent held by RBS and the 4.13 per cent stake of Singapore’s Temasek Holdings in BOC.
“The foreign banks selling their stakes will not have a huge impact on Chinese banks,” said Charlene Chu, a senior director of Fitch Ratings. “It’s not as if the minute the foreign investor leaves, there’s no one else there. Chinese banks can turn to others if they feel it’s necessary.”
In a bid to boost market confidence, Central Huijin Investment, a unit of CIC and the largest shareholder in the Big Three banks, spent 1.2 billion yuan (HK$1.36 billion) to raise its holdings in the A-share market between September 23 and November 28, the Shanghai Securities News reported last month.
Mr. Lou also said the sovereign fund had not pulled back from overseas markets and investment “has been continuing all the time”.
Xinhua reported on January 5 that CIC had stopped investing since September last year amid the global financial crisis and economic slowdown.
CIC was being “prudent” and had adjusted its spending plan set at the beginning of last year, vice-general manager Zhang Hongli was quoted as saying.
As the positive sentiment spilled over to the A-share market, shares in ICBC rose 2.01 per cent, BOC edged up 1.69 per cent and CCB climbed 4.05 per cent in Shanghai trading yesterday.
But Chen Ge, a fund manager at Fullgoal Fund Management in Shanghai, said he was still cautious on the bank shares as their profits were likely to shrink with the fast cooling economy.
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