BEA climbs on talk BOCHK may raise stake

Shares of Bank of East Asia rose as much as 2.6 per cent at one point yesterday as the market continued to speculate that BOC Hong Kong (Holdings) could increase its stake after BEA said it had held discussions with third parties about a possible transaction.

However, some analysts said the transactions the bank referred to could be about raising funds through a debt issue or share placement.

BEA rose as high as HK$55.30 in morning trade before falling with the market to close at HK$53.85, a decline of 0.09 per cent from Friday's close.

The market has been full of speculation about the city's fifth-largest lender, especially after BOCHK bought 4.94 per cent of BEA for HK$3.95 billion last month.

'The market is speculating that BOCHK may increase its stake in BEA, or that both banks may have some business co-operation,' said KGI Asia chief operating officer Ben Kwong Man-bun.

He said another reason behind the surge in BEA shares recently could be that local lenders were likely to match the expected US interest rate cut.

BEA rose to a record high of HK$61 before losing some gains to close at HK$53.90 last Friday. It has climbed 13.73 per cent so far this month.

The bank said in a statement on Friday that it had been in talks with third parties in relation to possible transactions which were, or might be, of a price-sensitive nature.

But it confirmed that there were no negotiations or agreements relating to intended acquisitions.

BOCI Research analyst William Wong Kwok-wai said the transaction BEA referred to was likely related to a planned debt issue to increase capital.

BEA's capital adequacy ratio stood at 13.1 per cent at the end of June, and analysts expected the bank to increase its capital if it continued to expand.

A spokeswoman said the bank had no further comment regarding the announcement.

Pending transaction

Analysts said BEA could be planning a debt issue or share placement

The amount Bank of East Asia shares have risen so far this month: 13.7%