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Copper company to invest in bank

By Wang Lan (China Daily)
Updated: 2008-03-01 10:09

Jiangxi Copper Co, the nation's leading copper producer, said on Friday it will buy a 4.2 percent stake in Nanchang City Commercial Bank for 280 million yuan ($39.35 million) in cash.

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Jiangxi Copper told the Shanghai Stock Exchange on Friday it will buy 100 million new shares to be issued by Nanchang City Commercial Bank at 2.8 yuan apiece. The equity purchase still needs regulatory approval and would make Jiangxi Copper the bank's second largest single shareholder.

"Although the stake is small, it demonstrates that Jiangxi Copper is flush with cash due to rising prices and strong demand for copper products in the past year," Liu Chao, an analyst at Xiangcai Qinian Futures Co in Shanghai, said.

Analysts said many metal manufacturers in China had a bumper year in 2007 and want to invest their windfall profits in other industries - particularly finance, which can provide a stable return. They're finding opportunities in the secondary cities' small provincial banks, which need new capital to meet loan demand from small- to medium-sized businesses.

Many provincial banks are also trying to diversify their shareholding structure to expand capital sources. Liu Minda, an analyst at Huatai Securities in Nanjing, said many commercial banks are expanding their shareholder base.

"There is still large growth potential for China's commercial banks," Liu said.

"Investment by listed companies like Jiangxi Copper will help inject more capital to finance commercial banks' further development," Liu Chao of Xiangcai Qinian Futures said.

Experts said Jiangxi Copper's capital injection into a commercial bank in the same province will also benefit the provincial economy. Nanchang is the capital city of Jiangxi province.

Jiangxi Copper runs the largest domestic copper smelting facilities in the nation, with an annual output of more than 800,000 tons in 2007. The group also operates the top five copper mines in China.


(For more biz stories, please visit Industry Updates)



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