China Merchants eyes raising $3.2bln via rights issue

Move aimed to replenish capital ratio after expansion of loans and acquisition of Wing Lung.

China Merchants Bank, the country’s sixth largest lender, has priced its long-awaited rights issue at a big discount to raise $3.2 billion, a move to replenish the bank's capital ratio after aggressively expanding lending last year and the richly-priced acquisition of Hong Kong's Wing Lung Bank.

The Shenzhen-based bank will launch the rights issue at a subscription price of HK$10.06 (US$1.29) for Hong Kong H-shares, which represents a discount of about 49.19% to the last closing price before the price determination date on March 2, while the subscription price of A-shares will be 8.85 renminbi (US$1.3), according to a statement by the Hong Kong and Shanghai Stock Exchange respectively.

The market has responded positively to the generous pricing of the rights issue, which sent the bank's shares up 2.53% in Hong Kong while the Hang Seng Index closed 0.7% lower.

The rights issue, which is the first to launch among its peers, is likely to be a reference for other banks. A number of Hong Kong-listed and Shanghai-listed Mainland lenders have announced fundraising activities.

View the full story in The Asset.