Huijin puts brakes on Temasek's bid for 10% stake in BOC

A bid by Singapore investment company Temasek to buy a 10 percent stake in the Bank of China (BOC) has stalled, a report said yesterday, as the giant lender's chief defended criticism of the deal.

China Huijin Investments, which controls 78.15 percent of the BOC, has indicated it is not happy with the involvement of the Singaporean government investment vehicle, the Hong Kong-based South China Morning Post reported.

"Huijin is BOC's major shareholder and at present it does not agree with Temasek becoming a strategic investor," the paper quoted a senior China Banking Regulatory Commission official as saying.

Under a deal announced early last month, Temasek was to have acquired a 10 percent stake in Bank of China for some US$3.1 billion, with the accord seen as a major agreement to help in the bank's planned listing next year.

The report cited the respected Caijing business magazine as saying that the eight-man board of Huijin, the Chinese government's own investment vehicle which manages its holdings in the "big four" banks, had voted down the proposal.

It said the board had a number of reservations over the extent of Temasek's investments in China, including in other banks.

The report coincided with comments by Bank of China president Li Lihui (李禮輝) in the Financial Times against criticism of the Temasek deal and the bank's other planned partnership with UK lender the Royal Bank of Scotland (RBS).

He told the Financial Times in Hong Kong that the involvement of the two would help with an overhaul of the bank's systems and operations ahead of its planned flotation next year.

"Temasek [has] been quite successful in making investments in a number of countries and have been instrumental in reforming and renewing banks that have been slightly problem-ridden," Li said in the Financial Times report.

"RBS is a very famous and very well run European bank," he said. RBS has agreed to pay US$1.6 billion for a 5.1 percent stake in Bank of China.

Li said the deals -- along with a 2.0 percent stake sought by UBS and the Asian Development Bank -- would be the only ones with overseas investors and that they were "in line with international best practices."

Neither Temasek or Bank of China could be reached for comment yesterday.

Currently, Chinese banks may open up to 20 percent of their equity to a single foreign investor and 25 percent for a group of investors.

Another top official with the China Banking Regulatory Commission said yesterday that 5 percent was the minimum limit for a strategic investment in a Chinese bank, although no such limit has been published officially.