Shares in Ka Wah Bank surged more than 25 per cent yesterday on hopes its largest shareholder - Beijing-based China International Trust and Investment Corp (Citic) - plans to build up the bank's business.
The stock closed $1.45 higher at $7.15, after hitting an intra-day high of $7.60 during morning trading.
Company secretary Kyna Wong confirmed there were no negotiations or agreements disclosable under the listing rules and the company informed the stock exchange it was not aware of any reasons for the increase in the price and volume of its shares.
The rally was driven by remarks from Citic president Qin Xiao that the mainland company was seeking to exploit its ownership of the bank, which it said was too small in its present form.
He said Citic might expand it with an injection of additional capital or a new share issue and did not exclude the possibility of a possible merger or acquisition.
Lehman Brothers regional banking analyst Raymond Lee said: 'Given Citic's intention to strengthen its banking business in Hong Kong and China, it will tend to favour Ka Wah's long-term development.' Mr Lee has been recommending the stock for the past eight months as he sees the bank as the most exposed to China, which accounted for 50 per cent of its profit last year.
Ka Wah's share price has almost doubled in the past month, fuelled by China Everbright IHD-Pacific's plan to buy a 20 per cent stake of the mainland-based Everbright Bank.
'Value is not the prime consideration for the time being. The market is focusing on the possible next stage of development,' Mr Lee said.
He said investors were looking forward to China's gradual opening of its potentially enormous financial market.
Ka Wah, with its strong mainland backing, is expected to clinch deals similar to the purchase of Everbright Bank by China Everbright-IHD.
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