Bank Of Communications to Raise RMB5B for Yuan Investment Fund

Bank Of Communications (3328.HK) said Tuesday it will raise RMB5 billion (US$758 million) for a yuan-denominated investment fund, the latest move by China's fifth-largest bank to diversify its business.

The Shanghai-headquartered lender's move comes after Shanghai relaxed rules to allow qualified foreign investors to switch foreign currency for yuan for the purpose of making private-equity investments, as part of the city's plan to become a global financial center.

State-owned BOCOM said in a statement that Singapore's Kheng Leong Co. Pte. Ltd. will contribute $100 million to the fund, which will invest in both state- and privately owned companies with growth potential and sound management.

Kheng Leong Co. is owned by the Wee family in Singapore, which also controls Singapore-listed United Overseas Bank Ltd. (U11.SG), brokerage firm UOB-Kay Hian Holdings Ltd. (U10.SG), and Haw Par Corp. (H02.SG).

"The launch of the fund is the bank's first trial in China's equity investment industry," China's fifth-largest lender by assets said in the statement.

BOCOM, which has licenses in trusts, asset management and insurance, added its wholly owned unit BOCOM International Holdings (Shanghai) Co. will manage the fund.

In recent months, Beijing has stepped up efforts to boost its nascent private-equity industry. China Development Bank Corp., a long-time private-equity investor, launched the country's first private-equity fund of funds in December.

China's commercial center, Shanghai, said last week selected qualified foreign investors can apply to convert foreign currency into yuan, which would make it easier for foreigners to invest in the private-equity sector, Xinhua News Agency reported Wednesday. However, capital provided by foreign investors to domestic private-equity funds won't be allowed to exceed 5% of the domestic funds' total capital, Xinhua added.

A handful of foreign companies, including Carlyle Group LLC and Blackstone Group LP, have launched yuan-denominated funds that raise funds from Chinese investors, capitalizing on Beijing's efforts to promote the yuan as a major global currency.