Beijing Ends HSBC's China Expansion Plans Via Bank of Communications -- FT

HSBC has received bad news concerning its 19.9% investment in China's Hong Kong-listed Bank of Communications [BoCom], according to the Financial Times, which says the chairman of China's Banking Regulatory Commission told it BoCom will be reclassified as a "large state-owned bank" instead of a "joint-stock bank." FT reports there are four other banks with this classification, collectively regarded as "integral state assets essential for ensuring government control over the economy and therefore the nation." HSBC originally bought its 19.9% stake -- the maximum for foreign investors under Chinese law -- in BoCom three years ago for $1.75 billion, with a clause allowing it to purchase up to a 40% stake when Beijing increased foreign investor limits. The government currently owns 41% of BoCom and the FT says further bad news for HSBC is an expected secondary offering of up to 30 billion yuan ($3.9b) on the Shanghai exchange by the government within the next two weeks. HSBC will reportedly have to pay about 6b yuan ($775m) to avoid having its stake diluted, but first will need permission to transact on the exchange. HSBC said it's "still working with the bank and authorities to look for ways to maintain its stake in BoCom."

Sources: Financial Times
Commentary: Four Foreign Banks Incorporate in China • HSBC, Citigroup, Get Key Approval for Chinese Banking • HSBC Posts Record Annual Profit Despite Subprime Woes
Stocks/ETFs to watch: HSBC Holdings plc (HBC), Bank of Communications [Hong Kong: 3328]. Competitors: Citigroup Inc. (C), Bank of East Asia Ltd. [ADR] (BKEAY.PK), Standard Chartered plc [London: STAN]. ETFs: BLDRS Europe 100 ADR Index (ADRU), BLDRS Developed Markets 100 ADR Index (ADRD), PowerShares Intl Dividend Achievers (PID); Bank of Communications is a 3.7% component of iShares FTSE/Xinhua China 25 Index (FXI)

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Comments

[Siwei Zhong:]

Chairman of Bank of Communications confirmed in public yesterday that HSBC will interest its stake through acquiring A-share. When asked by reporter whether that would happen within this year, his answer is a very positive "YES"

2007 May 17 04:13 AM