Bloomberg News

Chongqing Rural Declines on Construction Probe: Hong Kong Mover

April 17, 2012

Chongqing Rural Commercial Bank Co. (3618) shares fell, heading for a record two-day decline after a newspaper reported that the local government has started investigating the city’s construction projects.

The stock dropped as much as 8.2 percent in Hong Kong, extending yesterday’s decrease to as much as 15.5 percent, the most since the bank’s initial public offering in December 2010. It fell 6.8 percent to HK$3.54 at the 12:00 p.m. break and was the biggest decliner on the MSCI Asia Pacific Index. (MXAP)

Some government-owned companies in Chongqing were asked by the state-owned asset supervisor April 12 to report on their current situation, the China Business Journal reported on April 14, without citing anyone. In late March, the Chongqing government started to reassess the so-called Build Transfer project invested by the southwestern China city’s eight largest local-government financing vehicles and other state entities.

While it’s unclear how the probe will affect Chongqing Rural’s corporate clients and shareholders from state-owned enterprises, it may add to the bank’s non-performing loans, Sophie Jiang, a Hong Kong-based analyst at Religare Capital Markets, wrote in a note. She reiterated a “sell” recommendation with a 12-month target price at HK$2.51.

Sui Jun, a vice president of Chongqing Rural, wasn’t immediately available to comment.

Bo Xilai Scandal

Bo Xilai, former party secretary of Chongqing, was suspended from the Politburo on suspicion of being involved in “serious discipline violations,” the official Xinhua News Agency reported on April 10. His wife, Gu Kailai, was suspected in the homicide of a British businessman, the news agency said.

“The Bo Xilai scandal casts a pall over everything in Chongqing right now,” said James Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd. “The few foreign investors holding this counter are rushing to sell as a result.”

Chongqing Bank was established in June 2008 after the government merged rural cooperatives in the region. Based in Chongqing, China’s most populous city, it had 62,000 corporate and 17.5 million retail customers, according to the listing prospectus.

To contact Bloomberg News staff of this story: Luo Jun in Shanghai at jluo6@bloomberg.net Jacob Gu in Shanghai at Jgu3@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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