Temasek may buy stake in BoC

Temasek may buy stake in BoC

Agence France-Presse, Beijing

Temasek Holdings, the Singapore government's investment arm, is in talks to buy a stake worth more than US$1 billion in Bank of China (BoC), a report said on Tuesday.

If confirmed it would be Temasek's second foray into China's banks after last month confirming it would purchase 1$ billion worth of shares in China Construction Bank (CCB) during its public sale.

The Financial Times, citing people close to the situation, said Temasek could become one of BoC's "strategic investors" alongside Royal Bank of Scotland and UBS ahead of next year's overseas listing by the Chinese lender.

BoC, China's second largest bank, refused to confirm the deal but said an announcement would be made in the coming weeks.

"I don't know where their information is coming from, we are not making any comment on this," spokesman Wang Zhaowen told AFP.

"What I can tell you is that talks are still going on and we are going to make an announcement no sooner than the end of the month."

Temasek, set up in 1974 as one of the Singapore government's main investment firms, has been stepping up its foreign investments in recent years especially in Asia.

Last month, Hong Kong press reports said Royal Bank of Scotland, the second-biggest British bank, was on the verge of buying up to 15-percent of BoC for a maximum of $5.0 billion.

Switzerland's largest banking group UBS is also believed to be in talks for a stake, the Financial Times said, while Chinese finance magazine Caijing said the Asian Development Bank had also shown an interest.

The Chinese government selected BoC and CCB in 2003 to pilot financial restructuring and corporate governance reforms at its Big Four state banks, which also include Agricultural Bank of China and Industrial and Commercial Bank of China.

Beijing is keen to ensure the big banks move ahead with listing plans in order to attract funds and make them more competitive before the financial sector opens to foreign competition at the end of 2006.

Regulators also hope that pushing the state banks to go public and to bring foreign strategic investors on board will bring greater transparency to the sector.

This is considered sorely needed, as the banking sector has been rocked by corruption scandals and struggles under a mountain of bad debt accumulated over the years.