A man walks past a China Construction Bank Corp branch in Shanghai. Anonymous sources said Temasek and two Chinese institutions bought the lender's shares sold by Bank of America on Wednesday. Qilai Shen / Bloomberg

Singapore wealth fund Temasek Holdings Pte Ltd bought shares of China Construction Bank Corp sold in Hong Kong on Wednesday, a person with knowledge of the matter said, signaling its increased participation in China's financial sector as US banks retreat.

Temasek bought about a third of the stock that Bank of America Corp is selling at HK$4.93 apiece, another person with knowledge of the matter said, declining to be identified because the information hasn't been announced.

Two Chinese institutions will buy the rest of the 10.4 billion shares Bank of America is selling, the person said.

Foreign investors including Bank of America, Goldman Sachs Group Inc and Royal Bank of Scotland Group Plc have trimmed more than $25 billion of holdings in Chinese lenders since the beginning of 2009. Bank of America said it will sell the stock in private transactions for a profit of about $1.8 billion, leaving it with a 1 percent stake in the Beijing-based lender.

"This is an advantage that Temasek has at this time, especially when European and US banks are trying their best to raise cash," said Eugene Tan, an assistant professor of law at the Singapore Management University. "It suggests a quiet optimism. I get a sense that this deep interest in China at a time when companies and investors are generally wary suggests that Temasek is keen to have a first mover advantage."

Temasek paid about HK$17 billion ($2.2 billion) for the China Construction Bank shares, based on Bloomberg calculations.

Stephen Forshaw, a spokesman for Temasek, declined to comment on "market speculation". Mark Tsang, a Bank of America spokesman in Hong Kong, had no comment. Charlotte, North Carolina-based Bank of America said the buyers were a group of investors, without providing names.

This month, Goldman Sachs raised $1.1 billion by selling shares of Industrial & Commercial Bank of China Ltd, trimming an investment first made in 2006 after the stock posted its biggest monthly rally in two and a half years.

The three biggest Chinese banks posted their worst quarterly stock performance in the third quarter on concern that local governments may default on loans.

The lenders' credit outlook may sour in the absence of a government plan to deal with the issue, Moody's Investors Service said in July, while regulators globally are demanding that banks increase buffers.

Bloomberg

(HK Edition 11/17/2011 page2)