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Overseas institutions' locked shares up for trade

By Bi Xiaoning (chinadaily.com.cn)
Updated: 2008-12-17 16:50

Citigroup's 214 million shares in Shanghai Pudong Development Bank, or 3.78 percent of the bank's A shares can be freed up for trade as the lockup period is expected to be over by the year end, raising the concern that overseas institutions may offload the shares in Chinese banks.

Meanwhile, overseas institutions' approximately 35.3 billion shares in Bank of China, or 13.91 percent of the bank's H shares, can be unlocked as of December 31. The bank's four overseas shareholders include Royal Bank of Scotland, Asia Financial Holdings, Swiss Bank Co, and Asian Development Bank, which invested in the bank in 2005.

Shanghai Pudong Development Bank finished 1.71 percent lower at 13.8 yuan ($2.01) today, while Bank of China's H shares ended at HK $2.38. The market value of the two banks' total unlocked shares is estimated to be about 2.95 billion yuan and HK$84 billion respectively.

Citigroup signed a strategic cooperation agreement with Shanghai Pudong Development Bank five years ago. Years earlier, a number of overseas investors were introduced into Chinese banks to help them complete shareholding reform, perfect the corporate governance and improve profit ability.

After these commercial banks were listed, some disputes emerged regarding the overseas investors' assets pricing, resource exchanges and competition among the shareholders and strategic cooperation progress.

Industry analysts say the overseas institutions have much incentive to sell the unlocked shares to improve their financial performance, since their shares in Chinese banks have limited value-added space.

However, top management with Citigroup and Royal Bank of Scotland have repeatedly said that they have confidence in China's market and seek long-term development.