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BoCom plans huge rights offering

CHINESE banks are lining up to raise capital through new shares or bond sales to plug a capital shortage after rising loans in 2009.

Bank of Communications said today that it plans to raise as much as 42 billion yuan (US$6.15 billion) through a rights offering to replenish capital. It could be the biggest additional share sale by a Chinese company since PetroChina raised 66.8 billion yuan in a stock sale in October 2007.

The Shanghai-based bank will offer 1.5 shares for every 10 held in a rights offer for investors in Shanghai and Hong Kong, the bank said in a filing to the Shanghai Stock Exchange today.

"The bigger-than-expected maximum scale of the rights offer can blow the bank's performance in the equity market in the short run," said Fan Kunxiang, a Haitong Securities Co analyst. "However, if BoCom does raise the maximum 42 billion yuan, if will support the bank's capital concern for at least five years."

The offer is pending shareholder and regulatory approval and the company hasn't disclose the timing and pricing of the offer.

Banks in China extended a record 9.59 trillion yuan new loans in 2009 to shore up the economy, nearly doubling their 5 trillion yuan target.

Speculation is mounting that the China Banking Regulatory Commission will further tighten credit growth in China and show a firmer hand on capital requirements.


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