Hong Kong-listed shares of China Construction Bank Corp, the world's No.2 lender, rose more than 4 percent on Tuesday after news that Bank of America Corp will sell about half of its stake in the Chinese lender.
By 0224 GMT, CCB was up 4.3 percent at HK$5.79, its highest in about three weeks. The benchmark Hang Seng China Enterprises Index of top locally listed mainland companies was up 3.3 percent.
Trading volume spiked to a more than two-year high with more than 4.5 billion shares changing hands. Of that, 4.4 billion shares changed hands at HK$4.94 in pre-opening trade, said Patrick Yiu, a director at CASH Asset Management.
This suggests that about a third of the shares sold by Bank of America went to hedge funds and other institutional investors, Yiu said. It's a big discount on the CCB shares, and whoever was offered such a big discount should be happy to take it up.
A sale price of HK$4.94 per share would represent a discount of about 11 percent off CCB's Monday's close of HK$5.55, based on Reuters calculations. This comes on top of an about 10 percent discount that CCB was trading at compared with its two closest rivals Industrial and Commercial Bank of China Ltd and Agricultural Bank of China Ltd.
BofA is selling 13.1 billion CCB shares for $8.3 billion, it said on Monday, in its latest effort to shed assets and boost capital.
The biggest U.S. bank by assets did not name the buyers of its CCB stake, but two people familiar with the situation said Temasek Holdings Ltd was among the buyers. This would make the Singapore state fund CCB's biggest shareholder after the Chinese government.
Before adding the newly bought stake, Temasek owned 7.03 percent of the Chinese lender, according to figures released by the Hong Kong stock exchange.
This removes an uncertainty that's been hanging over CCB shares for a long time, said BNP Paribas analyst Dorris Chen in Shanghai. When you look at CCB's valuations, it's clearly a very strong buy, but asset quality concerns are going to drag on for a while more.
There have been widespread worries that asset quality at Chinese banks such as CCB and rival ICBC may sour if the country's economy slows, as many of them had lent freely during the global financial crisis to boost growth.
(Editing by Chris Lewis)