Temasek raises stake in ICBC in vote of confidence after rout

Temasek Holdings Pte, the biggest foreign investor in Chinese banks, has raised its stake in Industrial & Commercial Bank of China Ltd to 10 per cent of the company's Hong Kong-listed shares after a stock market rout drove the world's largest bank to record-low valuations. 

PHOTO: BLOOMBERG

SEP 23, 20155:55 PM

[SHANGHAI] Temasek Holdings Pte, the biggest foreign investor in Chinese banks, has raised its stake in Industrial & Commercial Bank of China Ltd to 10 per cent of the company's Hong Kong-listed shares after a stock market rout drove the world's largest bank to record-low valuations.

The Singapore state-owned investment company spent HK$141 million (US$18 million) to buy 30 million ICBC H shares at an average HK$4.696 apiece, according to a Hong Kong stock exchange filing on Wednesday. Temasek raised its stake from 9.97 per cent of ICBC's H shares.

"Temasek is confident in the long-term prospect of the Chinese economy," spokesman Jeffrey Fang said by e-mail. "We actively seek opportunities to broaden and rebalance our exposure to the Chinese economy."

Temasek's expression of confidence comes at a time when concerns are mounting that banks' sour credit will surge and Chinese President Xi Jinping will struggle to revive the economy as a stock slump erased US$5 trillion of market value. ICBC is trading at 0.8 times forecast book value for 2015, below the level seen during the global financial crisis and compared with an average of 1.3 times for the biggest global banks.

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Shares of ICBC have dropped about 30 per cent in Hong Kong since June 12 after rallying 37 per cent over the previous 12 months. The Beijing-based lender may report zero profit growth for this year on rising bad-loan charges and margin contraction, the weakest since data became available in 2001, according to analysts' estimate in a Bloomberg survey.

Temasek has been boosting its holdings of ICBC shares over the past four years. The firm bought 3.55 billion shares at HK$5.05 apiece from Goldman Sachs Group Inc. in April 2012 and then disclosed the purchase of more the following month. In May 2013, Temasek bought 280 million more from Goldman Sachs at HK$5.5 a share, and in October 2014, raised the holding at an average HK$4.935 each. ICBC closed at HK$4.55 in Hong Kong on Wednesday.

Temasek increased its exposure to China to 27 per cent of its portfolio in the year ended March 31 from 25 per cent in the previous year and broadened its investments from earlier ones in banks to include insurance, consumer and technology companies.

BLOOMBERG