Tuesday, November 23, 2010

Rights exercise for ICBC bank

ICBC, a china bank listed in HK (1398.hk), is going to have a rights issue. The reason for the rights issue is to meet the new basel III requirement for banks. ICBC is already well capitalised, so they do not require much of a capital injection. Hence, the rights of the H shares (that is, HK listed one) is on the basis of 0.45 shares at HK$3.49 for every 10 existing H shares held before XR.

The announcement is made here.

Having rights for HK listed companies is a little different from those in Singapore. I had experienced it before for my HSBC counter. Basically the shares are held in a custodian account held by whichever broker you had bought the H shares from. Hence, they will do the necessary paper work for you (don't be happy, you have to pay them for such things known as company action). They will send you a letter to ask you to tick your choice and you'll have to send it back, together with the payment for the rights.

I've no intention of subscribing to the rights at all, hence I've already disposed of ICBC long before this announcement. Last close was at 6.04. Based on this price, the price after the rights should go down to 5.93. ( {6.04*10 + 0.45*3.49}/10.45 ) It had been dropping after China announced more controls to raise the capital adequacy ratio of the state bank (which ICBC proudly belongs to) and hinting of more controls over its fight on inflation and the bubbling property market.

It'll be interesting to see how it reacts after the rights issue, by mid December this year.


Anonymous said...

I have been given 900 rights - what should I do now? I see that the rights are being traded at around HK$2.50 and to subscribe for it, it costs HK$3.49. What does this means? Should I simply buy from the market at HK$2.50 instead of subscribing at HK$3.49. Pse advise.

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