China SAFE Investments Ltd. is said to be weighing a plan to buy more into three listed commercial banks of the nation's Big Four amid releases of a succession of financing plans in the domestic banking market.
The three are Industrial and Commercial Bank of China (ICBC, SHSE: 601398, and SEHK: 1398), Bank of China (BoC, SEHK: 3988 and SHSE: 601988), and China Construction Bank (CCB, SHSE: 601939, and SEHK: 0939). There is possibility for the wholly-owned subsidiary of the nation's sovereign wealth fund China Investment Corp. (CIC) to inject capital into the three banks in principle, said Guo Tianyong, a senior professor with the Central University of Finance and Economics.
CIC will obtain at least USD 250 billion before February 14, of which 60 percent will be managed by third-party fund management firm, said sources quoting Z-BEN Advisors, a Shanghai-based research and consulting firm specializing in the Chinese investment management industry. In addition averaged PE ratio of banking stocks in the domestic stock market has touched a low level due to recession in it, recently, and that provides a good opportunity to China SAFE to buy more into the three banks.
Via the trading system of the Shanghai Stock Exchange, it bought 30.07 million shares of ICBC in early October 2009. Besides, it acquired 16.14million shares of CCB and 5.13 million shares of BoC. The three deals each cost it about CNY 148.5 million, CNY 93.6 million and CNY 20.5 million and helps lift the stake it controls in the three banks up by 0.01 percent, 0.01 percent and 0.0021 percent. It promised that it would continue buying shares of the three in the coming 12 months. Statistics show that current share prices of the three banks are at a similar level with those amid the deals.
But there will be uncertainty considering problems in implementation, reiterated Guo. The proportions of stake it controls in them are high, and that of stake it holds in BoC, the biggest foreign exchange lender in China, hits 67 percent. Considering optimization of their shareholding structures, it may leave such opportunities to other investors.
In order to replenish capital and raise capital adequacy ratio, BoC will issue CNY 40 billion convertible bonds, Li Lihui, president of the bank, said at a telephone conference recently. The plan has gained approval from its board and will be subject to its temporary shareholder meeting on March 19. And in a bid to optimize shareholding structure, the bonds will be not subscribed by China SAFE.
