Merchants Bank wins nod for rights issue

China Merchants Bank, the mainland's sixth-biggest lender by assets, said yesterday it had obtained Beijing's approval to raise about 20 billion yuan (HK$25.2 billion) through a long-awaited rights issue, becoming the first mainland bank to get the approval to replenish capital following a credit crunch late last month.

The Shenzhen-headquartered bank said in an exchange filing last night that it had received approval from the China Securities Regulatory Commission to issue about 3.07 billion new A shares to its existing shareholders.

Under the plan, it will issue 2.2 shares for every 10 shares held by investors.

The lender first announced two years ago that it planned to raise as much as 35 billion yuan in a rights offer to both its A and H-share investors on the mainland and in Hong Kong.

"Merchants Bank's rights issue plan offers a clear signal to investors to get ready for further signs of the regulator's intention to lift the [initial public offering] floodgate in August at the earliest," said Alma Yang, a portfolio manager at Shenyin Wanguo Asset Management.

The mainland's listing market has been virtually shut since October last year, partly because CSRC chief Xiao Gang has sent clear signals that he wants a crackdown on insider trading and market manipulation.

Concerns about the reopening of the market has drawn attention from jittery investors on the mainland, who are sceptical about a further drain on liquidity after the country's mutual funds posted capital outflows for nine consecutive weeks.