Bank of China fund-raising, valuation-wise very attractive
Bank of China Asia’s third-largest lender by market value plans to raise as much as 60 billion yuan ($8.9 billion) in a rights offer to replenish capital. The lender said July 2 it will sell shares in Shanghai and Hong Kong. The stock rose 0.3 percent to 3.4 yuan. The stock was unchanged at HK$3.97 on June 30 before trading was suspended the next trading day.
Bank of China’s, the country’s fourth-largest bank, major fund-raising move comes as an surprise as Agricultural Bank of China , the nation’s No.3 lender, is preparing to launch an IPO in Shanghai and Hong Kong, expected to raise $20 billion or more later this week.
Bank of China grew its loan book faster than China’s major banks in 2009, with its loan balance rising nearly 50%, as Chinese banks pumped out around $1.4 trillion of new loans to support economic growth. In that time, its capital adequacy ratio dropped from 13.43%, at the end of 2008, to 11.09% at the end of March this year.
The unexpected announcement also comes amid mounting talk that China could take steps to support its stock market, which is down 28 percent year to date, making it the world’s second-worst performer after Greece. But i think It’s a good timing to invest in Bank of China and other Chinese banking shares, because valuation-wise, they are very attractive.
Industrial and Commercial Bank of China and China Construction Bank, whose capital positions are stronger than Bank of China’s and AgBank’s, have indicated they could put off their massive cash raising plans to as late as next year if necessary