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Capital Group unit buys stake in China's AgBank

by Staff Writers
Hong Kong (AFP) July 22, 2010
A unit of giant US fund Capital Group said Thursday it had paid 1.63 billion US dollars for a stake in Agricultural Bank of China, after the bank's shares debuted in Hong Kong and Shanghai last week.

Capital Research and Management bought 3.93 billion shares of AgBank's Hong Kong-listed shares at an average price of 3.21 Hong Kong dollars (41 US cents), according to a disclosure on Hong Kong's stock exchange, a cent above its 3.20 Hong Kong dollar IPO price.

The lender's Hong Kong shares closed up 2.48 percent at 3.30 Hong Kong dollars on Thursday.

The purchase was equivalent to 1.24 percent of AgBank's outstanding shares, and 12.79 percent of its Hong Kong offering.

AgBank -- the last of China's Big Four state banks to list -- raised 19.23 billion US dollars in its initial public offering before its shares started trading in a dual listing in Hong Kong and Shanghai, which garnered a lukewarm response from investors.

AgBank has yet to disclose whether it will exercise an option to issue additional shares, a crucial factor in determining whether the sale will overtake Industrial and Commercial Bank of China's record-setting 21.9-billion-dollar IPO in 2006.

Several heavyweight foreign investors were drummed up to help make a success of the Hong Kong portion of the sale.

Investors included Qatar's sovereign investment fund, British bank Standard Chartered and Hong Kong's richest tycoon, Li Ka-shing.

The biggest investor in the Shanghai issue was China Life, the nation's largest life insurer by premium income.

A total of 40 percent of the mainland shares went to 27 so-called cornerstone investors -- mostly state-owned entities ranging from Cofco Ltd, China's main grain producer, to China Aerospace Science and Industry Corp to the operators of the Three Gorges Dam.

Despite this support, AgBank had scaled back its original IPO target of nearly 30 billion US dollars amid choppy markets and questions about the amount of bad debt on its balance sheet.

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