Money Matters, Simplified.
Bank of China plans to raise additional capital
by Ishita Sood - January 25, 2010 - comments
The nation’s second largest lender by market value, BOC also needs to maintain capital adequacy ratio of 9 percent. Its past ratio fell to 11.63 percent as on Sept. 30 after it lent 1.4 trillion Yuan for new loans.
Beijing, January 25 -- Hong Kong and Chinese stocks plummeted Monday after Bank of China’s decision to sell a $5.9 billion convertible bonds to raise additional capital.
The Hang Seng Index, which hit its lowest level on Friday, slipped 0.89 percent Monday morning. It ended at 20,542.42 points.
“With the withdrawal of stimulus measures from the world's two biggest economies, investors are worried that more funds will be flowing out of the market in the near term, and not just over the next one to two days,” said Belle Liang, research director at Core Pacific-Yamaich.
In the afternoon, there may be some bottom-fishing activity, but it's still on a downward trend,” she added.
Bank of China (BOC) aims to hold a shareholder meeting on March 19 to vote on the convertible bond sale.
BOC under pressure
BOC told analysts it will raise capital by selling a category of H shares traded in Hong Kong.
“Selling shares in Hong Kong will give the bank more flexibility in timing,” said May Yan, a Hong Kong-based analyst at Nomura International HK Ltd.
However, due to additional capital, the bank is now heavenly under pressure as it not only needs the extra money but also shareholder approval for selling equity.
“Banks may continue to fall, as investors are unsure how successful the capital-raising exercises will be,” said Simon Wong, an analyst at Guoyuan Securities.
The nation’s second largest lender by market value, BOC also needs to maintain capital adequacy ratio of 9 percent. Its past ratio fell to 11.63 percent as on Sept. 30 after it lent 1.4 trillion Yuan for new loans.
However, its core capital adequacy ratio was around 9.4 percent.
BOC said it aims to maintain a ratio of 11.5 percent during 2010 and 2012 so as to increase its loans by 16 percent.
Monday’s fall worst for steel makers
Monday’s fall was worst for steel makers because of weak market trading and overcapacity issues.
Hebei Iron & Steel, merged by three companies, fell by 12.4 percent after a five-week trading halt. Hebei Iron ranks second in China's steel industry after Baoshan Iron & Steel.
About BOC
BOC, one of the four state owned banks by people’ republic of China, is headquartered in Beijing.
Established in 1912, the bank is purely a commercial bank. It is the second largest lender in China and the fifth largest in the world.