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BOC shares' sales restriction lifted, feared to shock market

By Zhang Jiawei (chinadaily.com.cn)
Updated: 2009-07-06 18:04

Bank of China (BOC)'s 171.33 billion initial public offering shares held by Central Huijin Investment Ltd on the Chinese mainland A-share market had their sales restriction lifted today, Beijing Business Today said, citing an announcement by BOC.

Based on BOC's closing price of 4.63 yuan (68 cents) on July 3, the previously non-tradable shares held by Central Huijin, an investment arm of China's sovereign wealth fund, in BOC would be worth 793.24 billion yuan.

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The lift of the shares' sales ban may lead to a great shock in the stock market, which had seen the index rise by more than 67 percent to almost 3,100 points in the first half of 2009, the paper reported.

Despite Central Huijin's high-profile announcement to assure investors that the lift of sales restriction didn't mean it would cut its stake in the bank, some analysts as well as investors still worry that the lift of the ban would drag BOC's share price down and consequently cause a slump in the A-share market.

"If Central Huijin cut the huge sum of shareholdings of BOC, the stock index will definitely see a slump and the blow to the stock market would be fatal," Wang Shun, an analyst with Anhui Great Times Investment Consulting Co Ltd, was quoted by the paper as saying.

Some industry insiders, however, said there was no need to worry too much about the downward pressure on the stock index imposed by the lift, according to the paper.

They said ten percent of the unlocked shares would be taken over by the social security fund and would have another three years' sales restriction period.

And Central Huijin, which was been increasing its holdings of other companies' equity on the secondary market, is not likely to sell BOC's stocks immediately after the sales restriction was lifted, the paper reported, citing the insiders. Also, latest rules on the transfer of State-owned shares also indicate chances are slim for Central Huijin to take such a move.

Chinese equities extended gains Monday led by heavyweights, up 1.18 percent. The benchmark Shanghai Composite Index on Shanghai bourse closed at 3,124.67 points, up 36.30 points, or 1.18 percent.

BOC shares inched up 1.94 percent to close at 4.72 yuan in Shanghai.