Temasek to invest $2b in CCB rights

SINGAPORE

CCB plans to raise up to 61.6 billion yuan ($12 billion) this month in Asia’s biggest rights issue outside Japan to shore up capital after an industry-wide lending binge last year.

BofA, CCB’s second-largest shareholder with just under 11 per cent, will not participate in the offering and has been looking for a buyer for its rights entitlement. By taking over BofA’s rights, Temasek, which already owns about 5.7 per cent of CCB, will invest about 10.3 billion yuan, or $2 billion, in the Chinese lender.

Temasek spokesman Jeffrey Fang did not say how much its stake in CCB will increase as a result of the transaction.

Mr Ivan Li, an analyst at Kim Eng Securities in Hong Kong, said: “People would prefer BofA to sell the rights to Temasek because they are an existing shareholder and they have demonstrated that they will probably hold this stake for a longer term.”

He said BofA might be looking to protect its capital adequacy ratios ahead of tougher new international banking regulations coming into force with the Basel III agreement.

“Maybe politics also played a part, since BofA took money from the United States government. So to subscribe to the rights issue of a Chinese bank may not be a good idea,” he added.

CCB, whose largest shareholder is the Chinese government, is offering 0.7 share for every 10 existing shares at 3.77 yuan per A-share and HK$4.38 per H-share.

The price of the rights is about 43 per cent below CCB’s prevailing share price.

Industrial and Commercial Bank of China (ICBC), the world’s largest lender, is also raising funds to strengthen its capital base. ICBC yesterday announced plans to raise 45 billion yuan through a rights issue this month. — Temasek Holdings has confirmed it will invest an additional $2 billion in China Construction Bank (CCB) by taking up Bank of America’s (BofA) entire entitlement in the rights issue of China’s second-largest lender.AGENCIES

The divestment of Hana came a day after Temasek announced its investment of US$400 million in a Brazilian oil and gas firm. — Investment firm Temasek Holdings has confirmed it has sold its entire stake in South Korea’s Hana Financial Group.Ryan Huang

Until the financial crisis, sovereign wealth funds (SWFs) were viewed with great suspicion and a touch of hysteria in the western countries where they bought assets.Financial Times analysis revealed this week, a lot of the old concerns about SWFs are still alive.2010 The Financial Times Limited

However then they became heroes:

When other investors were fleeing, they rode to the rescue of tottering financial giants. Yet as a

Many of them deserve to be laid to rest.

One worry is that SWFs can use their financial clout — they manage an estimated US$3,000 billion ($3,944 billion) to US$4,000 billion of assets — for political and strategic ends.

China’s recent dash for natural resources in Africa to meet its increasing energy needs has heightened such fears. Recipient countries also fret about the funds’ lack of transparency and accountability. SWFs have taken up that challenge.

In 2008, many adopted the “Santiago Principles”, a code of conduct that included commitments to improve disclosure and invest solely on economic criteria. But critics complain that these are only voluntary guidelines, which are frequently breached.

We should not be naive about the potential risks that SWFs pose. There is certainly a case for expecting them to meet minimum disclosure standards and limiting their stakes in sectors vital to national security.

However, nor should we pretend that SWFs are solely or even principally instruments of foreign policy.

Their mandates typically include stabilisation of government revenues, long-term saving and economic development. If they fail to achieve these objectives — by pursuing political strategies or otherwise — they will come under pressure at home.

Even the China Investment Corporation was forced to change its ways after domestic criticism of its bad investments.

SWFs benefit developing and developed countries alike. As long-term investors, they offer liquidity when others pull out of the market.

They helped to recapitalise banks in the United States during the crisis. Some, such as Norway’s, have been purchasing Greek government bonds.

SWFs are the flip side of global trade imbalances. It is inevitable that some countries, such as those with natural resources, will accumulate trade surpluses.

SWFs play an important role in directing these surpluses to areas where they are most productively used.

The rise of SWFs has irrevocably changed the global economic landscape.

Recipient countries should embrace — rather than shun — the opportunities that this rise offers them.

If they fail to achieve these objectives — by pursuing political strategies or otherwise — they will come under pressure at home.

still not my cup of tea. 

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Next punters flavour...

AIG has been forced to lower its valuation for the Hong Kong initial public offering of AIA, its Asian business, to secure a US$1bn commitment from the Kuwait Investment Authority and other cornerstone investors. (Financial Times)

Dispatches: AIG lowers AIA valuation http://www.theedgesingapore.com/index.php

4 October 2010 By Simon Mortlock

Singapore’s Ministry of Trade and Industry did not respond by press time. Economic Times of India.Ryan Huang

GIC by far is making good progress, further this successful listing of GLP's public offer.

is opening from Oct 11 to 14, with it, an Oct 18 trading date.

DBS and Citi are also involved in GIC's IPO alongside JPMorgan, UBS and CICC.

Global Logistic Properties has set an indicative price range of S$1.78 to S$1.96 per share.

MAS may revalue Singdollar: Analysts

SINGAPORE

The currency reached a record high of $1.3120 against the US dollar on Friday. The local currency has gained 6.6 per cent this year, the third-best performance among the most-traded Asian currencies excluding Japan, after the MAS on April 14 unexpectedly revalued the exchange rate.

Morgan Stanley has revised its year-end forecast for the Singapore dollar higher to $1.28 against the greenback from a previous estimate of $1.35.

“The MAS will need to recentre the nominal effective exchange rate band in order to allow more headroom for the Singapore dollar to move higher,” wrote Morgan Stanley analysts Stewart Newnham and Yee Wai Chong in a report for clients.

“The combination of strong above-trend growth and a large external surplus is likely to continue to generate powerful, positive macro dynamic support for the Singapore dollar.”

Morgan Stanley expects the Singapore economy to grow 16 per cent this year, above the official forecast of between 13 and 15 per cent.

The bank expects 6 per cent growth next year. The balance of payments reached $13.7 billion in the three months through June, a fifth quarterly surplus, data from the Department of Statistics showed.

The MAS uses the exchange rate rather than interest rates to conduct monetary policy, adjusting the central slope or width of an undisclosed band of currencies in which the Singapore dollar is allowed to fluctuate.

The date of the MAS meeting this month has not yet been made public. — The Monetary Authority of Singapore (MAS) may allow the Singapore dollar to strengthen further at a twice yearly meeting this month because of the nation’s strong economic growth and balance of payments, according to Morgan Stanley.AGENCIES