Jan. 8 -- Bank of China Ltd. fell the most in a month in Hong Kong trading after billionaire Li Ka-shing sold a $511 million stake in the nation’s third-largest lender, joining an exodus of investors as share lockups end.
Bank of China lost 5.6 percent to HK$2 at the 12:30 p.m. break. Li’s Magnitico Holdings Ltd. sold 2 billion shares in the Beijing-based bank to institutions at HK$1.98 apiece, 7.5 percent below yesterday’s closing price, according to a stock sale document obtained by Bloomberg News.
Li, ranked Asia’s richest man by Forbes Magazine, follows UBS AG and Bank of America Corp. in cutting holdings in Chinese lenders after stakes they bought in 2005 became freely traded. Royal Bank of Scotland Group Plc, the bank controlled by the U.K. government, said it’s “reviewing” its stake in Bank of China.
“There’s a possibility we’ll see more sales of Chinese bank stakes by other global financial institutions,” said Kenny Tang, Hong Kong-based executive director of Redford Securities Co. “This has little to do with the quality and prospects of Chinese banks and more to do with the desperation of global lenders to shore up their balance sheets.”
RBS, Bank of America and Goldman Sachs Group Inc. are among overseas financial firms that bought stakes in Chinese banks before they went public in 2005 and 2006. While the investors touted the “strategic” nature of their purchases, the $740 billion of writedowns and credit losses banks and brokers have recorded worldwide since 2007 is adding urgency to stake sales.
“RBS is currently examining all of its investments as part of the strategic review” that started last quarter, Hong Kong- based spokeswoman Hui Yuk-min said in an e-mailed statement. “This includes our investment in Bank of China.” Bank of China spokesman Wang Zhaowen said the Chinese bank hasn’t yet received any notice on a stake sale.
Bank of America sold $2.8 billion of shares in China Construction Bank Corp. yesterday, capitalizing on almost $14 billion in paper profits from its 2005 investment after paying almost $33 billion for Merrill Lynch & Co.
Li, dubbed “Superman” by Hong Kong media for his investing skills, got 75 percent more for his Bank of China shares than he paid for them, netting him a profit of about $218 million. Li controls businesses spanning retail, real estate, container ports and energy in 57 countries.
Magnitico was part of a group of investors led by RBS that bought 20.9 billion shares in Bank of China in 2005, before the lender went public. Magnitico owned 24 percent of the group, giving it about 5 billion Bank of China shares, based on the Chinese bank’s 2006 Hong Kong IPO prospectus.
The sales “could drive market concerns of more potential stake sales by foreign investors” in Chinese banks traded in Hong Kong, Goldman Sachs Group Inc. analysts led by Ning Ma wrote in a note today. “We believe there could be better entry opportunities to add to bank positions in the first half.”
Bank of China shares held by the RBS-led group, which also includes Merrill Lynch, fund managers D.E. Shaw & Co. LP, Oaktree Capital Management LLC and Och-Ziff Capital Management Group LLC., were locked up until the end of last year.
The China Construction shares that Bank of America bought in 2005 became eligible for sale in October. Temasek Holdings Pte, the Singaporean state-owned investment company, can sell its 9.9 billion China Construction shares anytime as its lockup agreement ended in August, according to the bank’s listing document.
Goldman Sachs owns 16.5 billion shares in Industrial & Commercial Bank of China Ltd. and has agreed not to sell the shares until after April 28, 2009, according to the bank’s listing document.