A shareholder sold a large chunk of China Construction Bank shares yesterday, hoping to raise up to HK$4 billion, term sheets showed, without naming the vendor.
A banker familiar with the transaction told the South China Morning Post that leading steelmaker Baosteel was behind the sale.
The shareholder offered 810 million shares of the country's second-largest bank at HK$5.08 each, the International Financing Review reported yesterday.
The offering price was at about 2 per cent discount to the stock's close of HK$5.18 yesterday.
Deutsche Bank and HSBC were joint managers of the sale.
Baosteel was not available for comment last night.
James Antos, a senior analyst with Mizuho Securities, said the shareholder was taking advantage of an unexpected one-day rally to take profits on shares of mainland banks listed in Hong Kong.
The sale was a vote of less than full confidence in the outlook for mainland banks, considering the surge in overdue loans on the mainland in the past quarter, Antos said.
The nine Hong Kong-listed mainland banks' shares underperformed the market last month and fell an average of 15 per cent in the past five months.
Bank of America-Merrill Lynch sold 10.4 billion of its 12.5 billion Construction Bank shares for US$6.6 billion in November last year to improve its capital ratios. Of its remaining 2.1 billion shares, 2 billion are under lock-up until next year.
Singaporean sovereign wealth fund Temasek Holdings has also repeatedly traded the bank's shares, often gaining profits from its dealing in the past year. Temasek declined to comment yesterday.
Construction Bank reported a 14.5 per cent increase in net profit to 106.28 billion yuan (HK$130 billion) in the first half of this year. It is one of the better performing banks where lending profitability improved and bad loans dropped during the period.
However, the sector's outlook was dimmed by rising bad debt and thinning net interest margin - the spread between funding costs and loan interest - because of a weakening economy and regulatory changes.
Construction Bank said it was unrealistic to achieve double-digit growth in non-interest income in the second half because its ability to charge fees might continue to be affected by regulatory clampdowns.
Overdue credit - loans not yet qualified as bad - rose 43 per cent as the economy and exports weakened.
Stanley Li, an analyst at Mirae Asset Securities, said Construction Bank could suffer lower net interest margins in the second half.