Market: Shares Rise On China’s Bank Backing

The China Investment Corporation has backed 4 big lenders with increased share purchases.

The China Investment Corporation has backed 4 big lenders with increased share purchases.

Shares in the big banking firms of China have shot up this week, after the country’s wealth fund announced it would increase its backing of them.

According to the official Xinhua news agency, the domestic branch of the China Investment Corporation (called Central Huijin) bought shares in four major banks on Monday.

Boosting confidence

Experts say the move was taken to boost investor confidence after foreign markets and domestic policy have left investors risk-shy. The move was not taken lightly, as this share purchase was the first since the global banking crisis of 2008.

The move seems to have worked, at least in the short-term: Agricultural Bank of China shares jumped more than 12% on the Hong Kong main index.

Industrial and Commercial Bank of China also experienced a significant rise, jumping 7% in morning trading.

Despite the continual growth in the Chinese economy, investors have been wary of the market because of a global slowdown, especially concerning the eurozone debt crisis and the slow US economy.

Deal details

“They’re showing confidence in the banks, and support from the central government,” said Victor Wang of Macquarie Securities, commenting on the hike in shares.

The purchases were necessary, as Chinese bank shares have fallen 30% in recent months.

Details of the deal were released by the four Chinese firms that received help from Central Huijin.

Agricultural Bank of China had the most shares bought, at 39.1 million. Industrial and Commercial Bank of China, China Construction Bank Corporation and Bank of China said respectively that 14.6 million, 7.4 million and 3.5 million of their shares were bought by Central Huijin.

Though the move was huge, it only accounts for a small increase in overall shareholding of banks by Central Huijin. They were already the largest shareholder in the country’s biggest lenders.

Central Huijin also released a statement to the Hong Kong Stock Exchange saying that it would continue to increase its stakes in the four banks over this year.

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