CIC arm buying up bank shares as others sell
Updated: 2009-01-17 08:07
By Hui Ching-hoo(HK Edition)
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HONG KONG: Mainland banking shares eased their loosing streak Friday after China Investment Corporation (CIC) Chairman Lou Jiwei vowed earlier that its state-controlled investment arm has been purchasing shares of Bank of China, Industrial & Commercial Bank of China (ICBC) and China Construction Bank.
Lou's remark came after Royal Bank of Scotland (RBS) announced this week that it had sold a $2.37-billion stake in Bank of China, and after Bank of America unloaded $2.8-billion worth of shares in China Construction Bank on Jan 7.
"We have been increasing our holdings in the three banks," Lou said. "Prices are not what we are concerned about."
Also, he noted that the fund hasn't pulled back from overseas markets and investment have continued.
Boosted by Lou's comment, shares of China Construction Bank advanced 3.7 percent to HK$3.91, while ICBC and Bank of China rose 3.6 percent and 4.61 percent, respectively closing at HK$3.44 and HK$2.04.
On Sept 19, CIC affiliate Central Huijin Investment said it would buy shares in the three lenders to beef up market confidence. But CIC reportedly put the breaks on the plan amid the global financial crisis.
HSBC
Separately, banking giant HSBC suffered from huge short-sell pressure following investment banks Morgan Stanley and Goldman Sachs slashing the lender's targeted price to below HK$52 on fundraising concerns.
Shares of HSBC fell for six-straight trading days to close 3.33 percent lower at HK$63.80 yesterday.
In view of the mounting pressure, the market speculated that HSBC might follow foreign banks by unloading its stake in Bank of Communication.
HSBC currently owns a 19 percent stakes in Bank of Communication and a 16.8 percent stake in Ping An - the mainland's second-largest insurer.
However, Karl Thomson Securities Chief Portfolio Strategist Patrick Shum said he believes HSBC prefers to raise capital via a share placing instead of selling its mainland counterpart's shares to solve its financial problems.
"Downsizing Bank of Communication's shares isn't a preferable choice for HSBC given that the reduction will undermine the bank's mainland business," he said. "It is doubtful whether HSBC can buy the shares back at a competitive price once it disposes them."
"Unlike the case of Bank of America, HSBC has other fundraising channels," Hong Kong Institute of Investors Chairman Ricky Tam said. "But HSBC shares will linger between HK$55 and HK$60 in the short run as a result of the investment-bank reports."
Its shares closed 2.7 percent lower to HK$64.2 Friday.
(HK Edition 01/17/2009 page5)