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July 6 (Bloomberg) -- Temasek Holdings Pte, the Singapore state-owned investment company, is seeking to raise about HK$28 billion ($3.6 billion) by selling stakes in China Construction Bank Corp. and Bank of China Ltd., two of the country’s three biggest banks.
The Singapore-based investment company is selling about HK$18.7 billion of shares in Bank of China and about HK$9.3 billion in an offering of China Construction Bank stock, according to term sheets obtained by Bloomberg News yesterday.
Shares of China’s four biggest banks fell in Hong Kong trading yesterday after Moody’s Investors Service said banks’ loans to local governments may exceed official estimates by more than 3.5 trillion yuan ($540 billion) more than official estimates and the credit outlook for the industry could decline.
The extra liabilities, coming on top of the national audit office’s findings last week of 10.7 trillion yuan in local government debt, may fuel concern that banks will be unable to absorb losses on defaults should property prices drop.
Bank of China shares slid 0.3 percent to HK$3.86 in Hong Kong yesterday while China Construction Bank dropped 1.2 percent to HK$6.48. Industrial & Commercial Bank of China Ltd., the world’s most profitable bank, fell 0.5 percent to HK$5.93.
Morgan Stanley is managing both sales, the terms show. Jeffrey Fang, a spokesman for Temasek, declined to comment.
Temasek’s Fullerton Financial Holdings Pte. Ltd. unit is offering about 5.2 billion shares in Bank of China for HK$3.60 to HK$3.67 each, according to a term sheet. That’s as much as 6.7 percent less than yesterday’s closing price.
Temasek owned about 10.5 billion shares, or 12.5 percent, of Hong Kong-listed Bank of China, according to a Dec. 31 filing. The fund paid about $1.5 billion for a five percent stake in the lender in 2006.
Cairnhill Investments (Mauritius) Pte. Ltd. and Crescent Investments (Mauritius) Pte. Ltd., both controlled by Temasek, are also selling about 1.5 billion shares in China Construction Bank for HK$6.22 to HK$6.35 each. The Singapore fund holds seven percent, or 16.9 billion shares, of China Construction Bank, according to company filings.
Temasek, set up in 1974, bought $1 billion of stock in China Construction Bank’s initial public offering in 2005. It also purchased an undisclosed stake in the Chinese lender from China SAFE Investment Ltd. the same year.
--Editors: Edward Evans, Jon Menon.
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