Shares in China Construction Bank, the country's most valuable lender, slid more than 4% on Monday even after Bank of America poured cold water on a local newspaper report it planned to unload its stake in the Chinese bank at a discount.
The No. 3 US bank, which owns 19.13% of Construction Bank, aims to sell 3-6 billion of the Chinese lender's Hong Kong shares at a discount of 13%-17% to its Friday close, raising up to $3 billion, the Apple Daily cited unidentified market sources as saying.
Both the US firm - which is slashing up to 35,000 jobs over three years to save $7 billion and offset an erosion of business from a global economic downturn - and a source close to Construction Bank, denied the report.
The source, who declined to be identified due to the sensitive nature of the issue, told Reuters the report was simply untrue but gave no other details.
Several local fund managers contacted by Reuters also said they had not received any information relating to the possible sale of Construction bank shares.
"It is not true," Bank of America spokesman Robert Stickler said in an emailed reply to Reuters questions.
Still, the Chinese lender's stock fell as much as 4.4% in the morning. Analysts said investors believed Bank of America, which is set to fold in Merrill Lynch via a merger valued at $20.5 billion, would eventually reduce its ownership in the state-run bank in future.
"There is a possibility that Bank of America might sell its shares in CCB before the end of the year to capture the rise in CCB shares since the end of October," said Y.K. Lee, analyst at Core-Pacific Yamaichi. "That's the main reason why CCB is down."
"Bank of America needs more money because it is facing difficulties in its home market. Its delinquency ratio is rising," he added.
Speculation that Bank of America would unload part of its stake in China's largest property lender, has surfaced sporadically and many analysts say it's just a matter of time.
The report comes about a month after Bank of America actually nearly doubled its stake in the Chinese firm, which investors - shell-shocked by a year-long market slide - feared signaled the US lender was preparing to sell some of its pre-existing holdings in the bank to bolster its capital base.
Bank of America, which is facing increasing troubles at home, was barred from selling those newly acquired shares until August 29, 2011, but holdings it had bought previously were released in November from a three-year lock-up period, allowing them to be sold at any time.
Bank of America paid $3 billion for a 9% stake in CCB in June 2005, and invested another $1.9 billion this July. Despite a sharp slide in Chinese share prices this year, that $4.9 billion total investment was worth $14.5 billion as of September 30, almost tripling in value, Bank of America has said.
But just last week, Construction Bank president Zhang Jianguo told reporters he believed Bank of America would not sell shares of China's top property lender in the near term, citing his own communications with the US firm.
Before Monday's slide, stock in Construction Bank had rebounded more than 80% from a 52-week low of HK$2.50 in October. It is still down more than 30% so far this year.
"It's very likely that the American bank may try to unload its stake in the Chinese bank again to capture the recent strength of the bank's shares," said Patrick Yiu, a director at CASH Asset Management. "Selling pressure is still there, which may cap further upside of CCB shares." (Reuters)