China Construction Bank stock in HK soars

HONG KONG/SINGAPORE: Hong Kong-listed shares of China Construction Bank Corp rose more than 4 per cent yesterday after Bank of America Corp said it will sell about half of its 10 per cent stake in the Chinese lender, providing relief to investors by removing uncertainty surrounding the stake.

News that Temasek Holdings was among institutions that bought the shares offloaded by BofA also lifted CCB's appeal as the Singapore state investor had only about a month ago sold US$3.6 billion (US$1 = RM2.98) worth of CCB and Bank of China shares. Two sources familiar with the situation had told Reuters on Monday that Temasek is among the buyers of the BofA stake in the the world's No.2 lender by market value, a move that surprised some.

"They're behaving almost like a hedge fund, which is surprising because they've always talked about being a long-term investor," said James Antos, a banking analyst at Mizuho Securities in Hong Kong.

Temasek-linked investment firm Seatown, run by the state fund's head of strategy Jimmy Phoon, was also a buyer, another person familiar with the situation said. The person did not know the size of Seatown's purchase. Before adding the newly bought shares, Temasek already owned 7.03 per cent of CCB.

This makes it the largest CCB shareholder after the Chinese government, which owns 59 per cent of the banks through its Huijin investment arm. Temasek pocketed about HK$9.39 billion (HK$1 = RM38.36) when it sold part of its CCB stake for HK$6.26 per share on July 5. This is 43 per cent higher than the HK$4.38 it paid per share when it subscribed to BofA's share of the Chinese bank's rights offer, according to Antos' calculations. Separately, Temasek also raised its stake in China's No.4 lender Bank of China to 7.07 per cent from 6.96 per cent, according to a disclosure to the Hong Kong stock exchange on Monday.

It bought each share for HK$2.972, according to the disclosure, which would translate into a total deal size of about HK$288 million. That is a 7 per cent discount to BOC's current trading price of about HK$3.20.

Temasek had said in July it was bullish on China and is looking for opportunities in emerging markets and the US.

Temasek has plenty of cash, having added US$7 billion to its cash pile in its last financial year, 70 per cent more than a year ago. Standard & Poor's estimates that the fund, owned by Singapore's Ministry of Finance, had cash and bank balances of almost S$40 billion (S$1 = RM2.47) at the end of March 2010. By 0627 GMT, CCB was up 1.62 per cent at HK$5.64, its highest in about three weeks but paring earlier gains of over 4 per cent.

The benchmark Hang Seng China Enterprises Index of top locally listed mainland companies was up 1.9 per cent.

Trading volume spiked to a more than two-year high with about 4.7 billion shares changing hands. Of that, 4.4 billion shares changed hands at HK$4.94 in pre-opening trade, said Patrick Yiu, a director at CASH Asset Management.

"This suggests that about a third of the shares sold by Bank of America went to hedge funds and other institutional investors," Yiu said.

"It's a big discount on the CCB shares, and whoever was offered such a big discount should be happy to take it up."

Shares of CCB are down 17 per cent so far this year, worse than the 12 per cent fall on the benchmark Hang Seng Index. -Reuters