Hopu Fund buys stakes in Bank of China

HONG KONG -- A private-equity fund run by Fang Fenglei, Goldman Sachs Group Inc.'s China partner, purchased about $400 million of shares in Bank of China Ltd. from Royal Bank of Scotland Group PLC, according to a person familiar with the situation.

Hopu Investment Management Co., a $2.5 billion fund that Mr. Fang raised last year, bought the shares when RBS sold its entire stake in the Chinese lender for $2.4 billion this past week.

Hopu invested as part of a group it arranged that bought roughly $700 million of the U.K. bank's shares, according to the person. The person declined to disclose the other members of that investor group.

The purchase appears to be a bet that investors have oversold shares of Bank of China, which trade at a discount to its state-owned peers Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp.

Meanwhile, the head of China Investment Corp. on Friday said the sovereign-wealth fund has been increasing its stakes in ICBC, CCB and Bank of China. CIC Chief Executive Lou Jiwei made the comments on the sidelines of a briefing Friday in Beijing.

Hopu's investment is its second major deal after it invested about $200 million in a Mongolian mining project. Singaporean state investment fund Temasek Holdings Pte. Ltd. and Goldman Sachs are among the major investors in the Hopu fund.

Mr. Fang helped Goldman Sachs set up its China securities joint venture, Goldman Sachs Gaohua Securities Co., in late 2004. He still owns a stake in that venture and is the venture's chairman. Mr. Fang stepped back from day-to-day duties at Goldman Sachs when he launched the Hopu fund.

Several foreign strategic investors have been selling their shares in China's state banks following the expiration of lock-up agreements from when the stakes were purchased. The sales have exerted downward pressure on Chinese banking stocks.

(WSJ)