Central Huijin to move shares in Bocom to Ministry of Finance
Central Huijin Investment, a subsidiary of China Investment Corp, will transfer its shares in Bank of Communications to the Ministry of Finance in an attempt to reallocate resources for overseas investment.
Under the agreement, Huijin, which was integrated into a foreign exchange investment agency last year, will shift three billion H shares in the fifth-largest mainland lender to the ministry in a purely paper transaction with no money involved.
The deal has been approved by the State Council.
The ministry will increase its shareholding in Bocom from 20.36 per cent to 26.48 per cent after the transfer, making it the biggest shareholder in the bank.
The transaction was 'to optimise allocation in the nation's financial resources', Bocom said in a statement to the Hong Kong stock exchange. But analysts expect the move will make way for additional share purchase by strategic shareholder HSBC Holdings, which holds 19.15 per cent of Bocom.
A Bocom spokesman said the share transfer was normal among major shareholders. 'It has no material impact on our core business, nor does the ministry plan to acquire or restructure our assets,' the spokesman said.
Huijin is a special vehicle set up by the government in 2003 to manage capital injections into state-owned banks and other smaller lenders.
It has invested US$602 million in Bocom in 2004 to bolster the lender's capital strength before its listing on the Hong Kong and Shanghai stock exchanges.
'The government may want to smooth out responsibilities between different state institutions,' said Liao Qiang, an analyst at credit rating agency Standard & Poor's.
'The notion of having multiple government representatives on the executive board has changed. It may be a means to consolidate the government's power in the state's financial assets.'
Huijin also bought stakes in Industrial and Commercial Bank of China, Bank of China and China Construction Bank Corp as part of bailout plans before they were floated on the stock market.
HSBC, which gets about 40 per cent of its profit from Asia, paid US$1.75 billion for 19.9 per cent of Bocom in August 2004. It has an option, which takes effect in August, to raise its stake to 40 per cent should mainland rules permit.
Bocom is seeking a waiver from the China Banking Regulatory Commission to allow foreign investors a larger stake in the bank.