Banking

Central Huijin planning bond sales

By Wang Bo and Mao Lijun (China Daily)
Updated: 2010-08-05 09:06

Pedestrians walk past a branch of the Industrial and Commercial Bank of China (ICBC) Ltd in Beijing. Central Huijin is planning bond sales to fund major commercial lenders, including ICBC. [Photo/Bloomberg]

Part of the proceeds may be used to finance major commercial lenders

BEIJING - Central Huijin Investment Co, the domestic investment arm of China's sovereign wealth fund, is planning bond sales of over 190 billion yuan ($28.05 billion) in the next few months and will use the proceeds to fund major commercial lenders and export-oriented financial institutions, sources familiar with the matter said on Wednesday.

Nearly 110 billion yuan will be channeled into major State-run banks, as most of them need funds to meet the strict regulatory requirements and for future expansion plans. The remaining funds will be used to fund the Export-Import Bank of China and China Export & Credit Corp, a source close to the underwriters for the bond issue told China Daily on condition of anonymity.

"The bonds will be sold in the interbank market in two or three tranches in the coming months, but details of the issue are yet to be fixed," the source said.

The move came after major Chinese lenders, including Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB) and Bank of China (BOC), recently announced a string of plans to tap the capital markets for fresh funds.

Central Huijin, the parent company of major Chinese State-run banks, has pledged to participate in the impending share offerings of the nation's top three listed lenders.

ICBC, the world's largest lender by market value, said last week that it planned to raise up to 45 billion yuan from a rights issue in Shanghai and Hong Kong to strengthen its capital base, while CCB and BOC plan to raise some 75 billion yuan and 60 billion yuan from both markets.

Owning 57.09 percent, 67.53 percent and 35.42 percent of ICBC, CCB and BOC on behalf of the government, Central Huijin may need to spend at least 100 billion yuan on the floats to maintain its majority shareholder status in the State-owned banks, analysts said.

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Sources indicated earlier that the bond sales could start as early as this month, but it might be delayed for one or two months in order to find a better timing when the market liquidity becomes sufficient.

"There is still enough time to prepare for the bond issue as the fund raising plans of these three major banks are likely to materialize later this year," Qiu Zhicheng, a banking analyst with Guosen Securities said.

"Another factor that might delay the bond issue is the impending float of China Everbright Bank," he said.

Everbright Bank, the country's 11th-largest lender by assets, is expected to raise as much as 20 billion yuan in an initial public offering in Shanghai as early as this month, prompting the regulator to control the pace of all sorts of fund raising plans to create a better market condition for the IPO.

Market liquidity will be more than sufficient in October, as the central bank usually injects more capital into the market through open market operations before the national holiday in October, analysts said.