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China Construction Bank to raise $9.2 billion

China Construction Bank to raise $9.2 billion

China Construction Bank, the country's second-biggest lender, plans to raise 61.6 billion yuan ($9.2 billion) from a share sale in Shanghai and Hong Kong to help fortify its capital base following a lending boom.
The announcement by the bank, made late Tuesday, follows news that Bank of China Ltd. will raise up to 60 billion yuan ($8.9 billion) and that Industrial & Commercial Bank of China will raise up to 45 billion yuan ($6.7 billion) in similar stock sales known as rights issues that are limited to existing shareholders.
A third major bank, Bank of Communications, raised 33.1 billion yuan (about $5 billion) in July.
The state-owned banks are raising billions of dollars to shore up their balance sheets after lending a record 9.6 trillion yuan ($1.4 trillion) in 2009 to finance Beijing's economic stimulus.
Construction Bank had earlier announced it might raise up to 75 billion yuan ($11 billion), but reportedly scaled back that plan due to concerns that such a huge rights issue might hurt share prices.
Shareholders will have the right to purchase 0.7 share for each 10 Construction Bank shares they own, the bank said. It said the new shares will be sold at 4.38 Hong Kong dollars (66 U.S. cents) and 3.77 yuan (56 U.S. cents) each.
The share sale is meant to replenish the bank's capital and improve its capital adequacy ratio.
Both the Construction Bank and Bank of China earlier had announced their rights plans, and received final approval from the China Banking Regulatory Commission last week.
The biggest shareholder in the lenders, Central Huijin, an arm of China's sovereign wealth fund, has committed to buy the new shares issued in Shanghai. That could help avoid flooding the market with new shares, a concern that depressed stock prices earlier this year when the fundraising plans were announced.