Bank of China gets nod for $8.8 billion share sale

10:46, September 10, 2010      

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Bank of China's Shanghai-listed shares languished Thursday, reflecting lingering concerns over the health of the sector after the bank obtained regulatory approval for an $8.8 billion share placement in Hong Kong and Shanghai.

China's No. 4 bank joined larger rivals, including top lender Industrial and Com-mercial Bank of China (1398.HK), in tapping investors for billions of dollars for recapitalization after a 2009 lending binge to support the government's economic stimulus.

Chinesebanks are expected to raise a total of some $70 billion, also in an effort to meet tighter capital adequacy ratios demanded by regulators to pre-empt a rise in bad loans.

The approval from the China Banking Regulatory Commission (CBRC) for the Bank of China share placement was expected and had muted effect on its Shanghai-listed shares, which fell 0.9 percent in morning trade.

Its Hong Kong-listed shares have fallen 4.5 percent versus Hong Kong's Hang Seng Index HSI, down 3.6 percent year to date.

"Chinese banks' valuations are considered low now and we think they will stay that way in the immediate term," said Shen Wei, banking analyst at Everbright Securities in Shanghai.

"The low valuations suggest that investors are still worried about banks' asset quality," Shen said.

Shares of Chinese lenders have performed poorly so far in 2010 because investors were worried that the surge in share supply from the fundraisings would dilute earnings and cap share price gains.

Source: Global Times


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