WRAPUP 2-BOC plan for $6 bln share issue to hurt markets, AgBank

* BOC plans HK rights issue, Shanghai also possible –
sources

* Strong institutional response seen for AgBank IPO –
source

* HK market down 5.2 pct in Q2, Shanghai lost 27 pct y-t-d
(Updates stock prices, adds graphics links)

By Clare Jim and Samuel Shen

HONG KONG/SHANGHAI, July 2 (BestGrowthStock) – Bank of China
(3988.HK: ) could announce a $6 billion share issue soon, sources
said, in a move that may undermine the confidence of an already
jittery stock market and make life tough for rival Agricultural
Bank of China’s [ABC.UL] mega IPO.

Bank of China’s move, together with what could be the
world’s largest-ever IPO from AgBank, will aim to garner $30
billion in the weeks ahead, severely testing the appetite of
investors in Hong Kong and Shanghai, where stocks have fared
poorly amid a broader global sell-off.

“Bank of China’s fund-raising plan would be another blow to
an already fragile market, and could also sap demand for AgBank
shares and drive down valuations of banking stocks,” said Jin
Lin, a Shanghai-based analyst at Orient Securities.

“For mainland investors, it triggers fears that Bank of
China may also announce share sale plans in the domestic
market.”

Bank of China (601398.SS: ), the country’s fourth-largest
lender, plans to tap its shareholders for about $6 billion via
a rights issue, complementing a plan announced last month to
raise $5.9 billion through a convertible bond sale in Shanghai,
three sources who are familiar with the matter said on Friday.

They said the rights issue would occur in Hong Kong. But
another source said the dual-listed bank could also be
considering a rights issue for its shareholders in Shanghai, as
domestic media reported the two issues could raise up to 60
billion yuan ($8.85 billion) combined.

Underwriters for the bank, whose Hong Kong and Shanghai
listed shares were both suspended pending an announcement, were
set to hold a meeting on Friday on the matter, said one of the
sources.

A Bank of China spokeswoman had no comment on the
suspension.

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For a Take A Look on AgBank: [ID:nSGE65307X]

For comparative StarMine table: http://r.reuters.com/rew45m

China bank fund-raising graphic:
http://r.reuters.com/rux45m

For a Newsmaker on AgBank Chairman: [ID:nTOE64U07W]

For a Reuters TV segment: http://link.reuters.com/nyn25m

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Bank of China had said in March it aimed to offer more Hong
Kong-listed H-shares for subscription, which could be 20
percent of its H-share capital, potentially strengthening its
balance sheet by about $7.7 billion. [ID:nTOE65007U]

AGBANK IPO

The latest BOC plan would come as AgBank, China’s
third-largest lender, prepares for a $20 billion-plus initial
public offering via a dual listing in Hong Kong and Shanghai,
in what could become the world’s largest-ever IPO.

AgBank’s offer to institutional investors for the Shanghai
portion met with strong demand when it launched on Thursday,
drawing 30 billion yuan in bids from potential strategic
investors, a source with direct knowledge of the situation
said.

Markets were unimpressed. Hong Kong shares closed at a
three-week low on Friday, following a 5.2 percent decline in
the second quarter. And Shanghai shares hit a 15-month low on
Friday before reversing course to end up for the day. Still,
they are down 27 percent so far this year.

Bank of China, AgBank and most other major Chinese lenders
have announced plans to raise billions of dollars this year to
bolster capital adequacy ratios that fell following a lending
binge as part of China’s 4 trillion yuan economic stimulus plan
at the height of the global downturn.

The banking regulator is strongly pushing for the
fund-raising, concerned about weakened balance sheets that
could further deteriorate if many of the loans made during the
lending boom start to go bad.

Others who have announced potential fund-raising plans
include the nation’s top two lenders, ICBC (1398.HK: )(601398.SS: )
and China Construction Bank (0939.HK: ) (601939.SS: ), although
both of those plans could be delayed until markets improve,
according to officials and media reports.

Chinese media also reported in May that the state council,
or cabinet, has approved a combined 287 billion yuan
fund-raising quota for the country’s four biggest lenders.
[ID:nTOE64C03K]

“The market, whose liquidity is already weakened, is sure
to be pressured if a 60 billion yuan fund-raising is being
carried out,” said Sheng Nan, an analyst with UOB Kay Hian, in
reference to talk of Bank of China’s plans.

($1=6.780 Yuan)
(Additional report by Michael Wei in BEIJING, Kennix Chim,
Fiona Lau and Chen Min in HONG KONG and Aipeng Soo in SHANGHAI;
Writing by Doug Young; Editing by Muralikumar Anantharaman)

WRAPUP 2-BOC plan for $6 bln share issue to hurt markets, AgBank