Temasek Holdings Pte said on Wednesday that it will not sell its shares in Agricultural Bank of China Ltd (ABC). The comments came after the Singapore government investment company sold stakes in Bank of China Ltd (BOC) and China Construction Bank Corp (CCB) last week.
"We are confident in the long-term development of the banking industry in China," said Ding Wei, head of operations at Temasek China.
The company raised HK$28.2 billion ($3.63 billion) in the Hong Kong market on July 5 by selling stakes in two of China''s four biggest State-owned banks, including HK$18.8 billion-worth of shares in BOC and approximately HK$9.5 billion in an offering of CCB.
Ding said the sales were made to just to reduce the investment company''s holdings in the banking industry and the reduction was on "a small scale".
After trimming its stakes, Temasek currently holds about $14 billion of CCB''s shares and about $3 billion of BOC''s stock.
The move was considered to come at a "sensitive time point", as ABC will lift the ban on the sale of the 5.1 billion shares owned by strategic investors in Shanghai''s A-share market on Friday, a year after its IPO. The 12.4 billion shares held by its cornerstone investors in Hong Kong will open for sale on July 18.
Temasek was reported to have invested $200 million in ABC''s $20 billion IPO, considered the largest in history.
Prior to Temasek''s announcement, ABC had not received any notice from institutional investors of the sale of its shares following the lifting of the ban, according to a report in the Chinese media, which cited ABC''s Chairman Xiang Junbo.
The Chinese banking sector has been under pressure recently, especially after Moody''s Investors Service warned that problem loans to local governments could exceed official estimates, which fueled concern that lenders will be unable to absorb losses on defaults.
But Ding said the concerns won''t alter Temasek''s long-term expectations of China''s prospects.
"We will continue our investment in large-scale and high-development Chinese banks, such as CCB and BOC, because they are in line with Temasek''s long-term investment strategy." He added that the company will also consider investing in smaller banks with the same attributes.
"The recent poor performance of Chinese banking stocks is actually an opportunity for mid- and long-term investors both in the Shanghai and Hong Kong markets," said Chen Xingyu, an analyst with Phillip Securities Group.
"After all, the banks are now at a very low valuation, and have an expected overall growth of 20 to 30 percent," Chen said.
With the exception of Singapore, China remains the largest investment destination for Temasek, accounting for 20 percent of its investments, which are worth S$193 billion ($157.6 billion). The value of Temasek''s assets climbed 3.8 percent in the year ended March 31, according to the company''s annual report.
The report showed S$13 billion of newly added investment and a reduction of S$9 billion. The new investments involve seven Chinese companies, accounting for more than 40 percent of the total volume.
Apart from BOC and CCB, Temasek spent S$90 million on Asian Citrus Holdings Ltd, the largest orange-plantation owner and operator in China, S$50 million on the Chinese video website tudou.com and S$50 million on Alibaba Group Holding Ltd. It also invested in the Beijing-based insurer New China Life Co Ltd, and Shanghai Pharmaceuticals Holding Co, China''s second-largest drug distributor.
"The increasing income of the middle-class and the economic transformation in China are driving related industries such as housing, healthcare, and technological innovation, which all can bring added-value for investors," said Ding.
(Source from China Daily)