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STANDARD Chartered (Stanchart) risks losing its status as one of Hong Kong's three note-issuing banks if Temasek Holdings continues to raise its stake in the firm.
Temasek bought 14.5 million shares on Wednesday, raising its interest in Stanchart from 18 per cent to 19 per cent following a 20 per cent slump in the bank's stock price over the previous nine days.
Temasek's higher stake has placed London-listed Stanchart closer to the threshold that the Hong Kong Monetary Authority has set for banks that issue notes.
The city's de facto central bank has ruled that a foreign, government-linked entity cannot own over 20 per cent of the voting rights of a note-issuing bank.
The other two banks in Hong Kong that have a licence to issue notes are Bank of China and HSBC.
Being a Hong Kong note issuer enhances a bank's status and marketing clout, although it is not itself a lucrative activity.
Hong Kong's financial regulator is 'keeping an eye' on Temasek's Stanchart investment, said Mr Patrick Wong, a spokesman for Financial Secretary John Tsang, in a Bloomberg report yesterday.
'The holding of Temasek still doesn't trigger any action from us,' said Mr Wong, but he declined to comment on Bloomberg queries about whether the bank's note-issuing status would be affected should Temasek's stake exceed 20 per cent.
The final decision is made by the city's top politicians, including Hong Kong's chief executive.
Market watchers believe Stanchart may not be in real danger of losing its note-issuing status if Temasek convinces Hong Kong authorities that it will not get directly involved in Stanchart's affairs.
Temasek does not have a seat on Stanchart's board, and it has not sought one, said Temasek executive director Simon Israel in a statement to The Straits Times yesterday.
'As a supportive shareholder, we look to the board and management of Standard Chartered to continue to create sustainable value for all shareholders,' he added.
Temasek has built up its stake from 12 per cent almost two years ago to 19 per cent. Its latest deal saw it pay about £228 million (S$643 million), based on the bank's closing price on Wednesday last week.
'We invest where we see value and have capitalised on current market opportunities to increase our shareholding in a strong financial services player,' Mr Israel said.
Stanchart confirmed that Temasek 'so far has not asked for a board seat'.
A Stanchart spokesman, Mr Gabriel Kwan, told Bloomberg: 'We believe they are sophisticated and responsible shareholders and are aware of the broader implications of the level of their shareholding.'
Stanchart has another state-owned investor apart from Temasek - Istithmar PJSC, a Dubai government-owned private-equity investor that manages more than US$10 billion (S$14.2 billion). Istithmar holds a 2.7 per cent stake in the bank.
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