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Standard Chartered to invest $500 million in China's AgBank

Seeing China as a key market, emerging markets bank Standard Chartered, based in Britain, is to buy 500 million dollars (409 million euros) worth of shares in Agricultural Bank of China.

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AFP - Emerging markets bank Standard Chartered announced a big investment in Agricultural Bank of China's flotation in Hong Kong next month, saying on Wednesday it will buy 500 million dollars' worth of shares.

Standard Chartered, which is based in Britain, said that this investment, equivalent to 409 million euros, was driven by a belief that China was a key market, that Agricultural Bank of China was a great bank, and that the investment would help cement a strong relationship.

The Chinese group, known as AgBank, is the last of China's "Big Four" state banks to float on the stock exchange, and has kicked off the world's biggest share offer worth a record 23.2 billion dollars.

AgBank, set up in 1951 to lend money to China's agricultural sector, is selling off a chunk of the business in a dual initial public offering (IPO) in Hong Kong and Shanghai.

"Agricultural Bank of China is a great bank with a great future," said Standard Chartered Group Chief Executive Peter Sands in an official company statement to the London Stock Exchange.

"This investment is a natural next step in our longstanding relationship and it underpins our recent agreement to develop business together."

Standard Chartered will buy shares listed on the Hong Kong stock exchange, using its cash reserves "for the number of shares with a total value at the offer price of the Hong Kong dollar equivalent of 500 million US dollars".

Sands added: "China is a key market for us and our partnership is a strong symbol of our commitment there."

However, Standard Chartered's share price slid 0.12 percent to 1,657.5 pence in morning deals, while the London FTSE 100 index of leading companies rose 0.44 percent to 4,935.71 points.

Bruce Packard, research analyst at broker Seymour Pierce, said that fears about the strength of the Chinese economy were weighing on the stock of the Asia-focused British bank.

He also noted that Standard Chartered and AgBank had recently signed an agreement to develop new business opportunuties together.

"For Standard Chartered, this deal has a lot of potential," said Packard.

"However, the payback could be well into the future and more near term concerns over Chinese economy slowing may weigh on (the) share price in the meantime."

The IPO has won bedrock support from other heavyweight investors, including Qatar's sovereign wealth fund and US food giant Archer Daniels Midland.

"There is an interesting mix of investors in the IPO," added Packard.

"Middle Eastern investors, having had mixed success buying stakes in Western banks, are trying to catch up on Chinese investments."

AgBank's stock market flotation is on track to overtake a previous record of 22 billion dollars that was set by Industrial and Commercial Bank of China in 2006.
 

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