Hard-hit state firms may follow Baosteel's lead in selling assets

Leading steel-maker Baosteel's share divestment in China Construction Bank last week shows large state-owned enterprises hit hard by overcapacity could need to further sell non-core assets to generate liquidity, analysts said.

Baosteel yesterday confirmed the sale, which reportedly raised HK$4 billion, saying the move was a "market operation".

"Most steel mills lost money in August. It's reasonable to sell down some non-core investment to boost cash flow," said Stanley Li, an analyst at Mirae Asset Securities.

Many large state-owned firms were called to support the initial public offerings of state banks.

Baosteel's sale also comes as the outlook for mainland banks weakens. While Construction Bank fared as one of the better performers in first-half results, market sentiment has been pessimistic.

The average share price of the nine mainland banks listed in Hong Kong has fallen by about 21 per cent since the end of April.