China banks' fund-raising causes concerns in stock market

15:33, July 05, 2010      

Email | Print | Subscribe | Comments | Forum 

The performance of China's A-share market was the worst among capital markets worldwide during the first half of 2010, partly because the country's largest banks underwent refinancing.

Bank of China's recent huge share sale will make the market even more sensitive, predicted analysts.

Bank of China announced on July 2 that it will raise up to 60 billion yuan from a rights issue in Shanghai and Hong Kong, about one month after the bank raised 40 billion yuan by selling bonds convertible into its Shanghai-traded shares.

According to the announcement, Bank of China's move is aimed at strengthening its capital base and increasing its capital adequacy ratio. The bank plans to issue up to 1.1 rights shares for every 10 existing Shanghai-listed A and Hong Kong-listed H shares, and the two classes of shares will adopt the same allotment ratio.

The Shanghai Composite Index fell below 2,300 points on July 2, and investors became very concerned about the future of the A-share market. However, the index rebounded at the end of the day thanks to capital flowing into the sectors including real estate, banking and insurance.

"If the Industrial and Commercial Bank of China (ICBC), Bank of China and China Construction Bank implement their refinancing plans in the second half of 2010, this year's A-share market will definitely remain bearish," a stock investor surnamed Wu said.

In fact, China Construction Bank recently came up with a plan to issue up to 75 billion yuan of A and H shares approved at its general meeting of shareholders on June 24. Moreover, ICBC announced on May 18 that it will raise up to 25 billion yuan by selling bonds convertible into its A shares when the market environment improves, but its succeeding refinance program and the total sum have not been set yet. It is estimated that ICBC may also raise fresh funds by issuing both A and H shares.

Optimists predict that the A-share market will probably not suffer from a fund shortage in June, given renewed RMB exchange rate reform. Meanwhile, the growing expectations of RMB appreciation will bring more capital into the stock market and thus reduce liquidity pressure. In this way, it is highly possible to see a bullish A-share market in July.

By People's Daily Online

(Editor:祁澍文)

  • Do you have anything to say?

双语词典
dictionary

  
Special Coverage
  • Premier Wen Jiabao visits Hungary, Britain, Germany
  • From drought to floods
Major headlines
Editor's Pick
  • On Sept. 28, tourists travel around the Mingshashan Scenic Area in Dunhuang, Gansu province by camel. With the National Day vacation right around the corner, more and more tourists from home and abroad are going to Dunhuang. Riding on a camel, they travel in the desert to enjoy the cities rare form of natural scenery. (Xinhua/Zhang Weixian)
  • Chinese forest armed forces work together with forest firefighters on Sept. 28. (Xinhua/Chai Liren)
  • Photo taken on Sept. 29, 2011 shows strong wind blows trees in Sanya, south China's Hainan Province. Typhoon Nesat heads towards south China and is moving at an average wind speed of 20 km per hour toward the west coast of China's Guangdong Province. (Xinhua/Hou Jiansen)
  • A fallen tree is seen on a road in Qionghai, south China's Hainan Province, Sept. 29, 2011. Typhoon Nesat was predicted to land in Hainan later Thursday, bringing heavy rainfalls to the island. (Xinhua/Meng Zhongde)
  • Arash Kamalvand (L) of Iran spikes the ball during the semifinal against South Korea at the 16th Asian Men's Volleyball Championship in Tehran, Iran, Sept. 28, 2011. Iran won 3-1 to advance to the final. (Xinhua/Ahmad Halabisaz)
  • A man visits "Thy Word Is Truth, the Bible Ministry Exhibition of the Protestant Church in China", during its opening at Mount Vernon Place United Methodist Church in Washington DC, capital of the United States, Sept. 28, 2011. Through the Bible's various Chinese versions, ancient or modern, as well as pictures, paintings, calligraphy, art works and historical documents, the exhibition was expected to give an overall understanding of how Bible was brought into China, how it was translated, published, distributed and loved. (Xinhua/Zhang Jun)
Hot Forum Discussion