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China’s Central Bank now owns 1.01% in HDFC

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China’s Central Bank now owns 1.01% in HDFC

 

The People’s Bank of China (PBOC) has raised it’s stake in India’s leading mortgage lender HDFC to 1.01%. The Chinese Central Bank had already owned 0.8% equity in Housing Development Finance Corporation (HDFC). The stake hike by PBOC has raised some concerns in the country as India is already reeling under a virus outbreak which allegedly originated in China. However, currently there is no law to prevent a Chinese company from investing in any Indian company.

PBOC raises stake in HDFC

According to the shareholding disclosure, the Chinese Bank had held 1.75 crore or 0.8% equity in the Indian entity prior to this increase. However, it is not clear as to when the HDFC equity was accumulated during previous quarters.

Since the beginning of 2020, HDFC stock has fallen by around 40% from it’s peak. The stock from a high of Rs 2,493, has posted a low of Rs 1,702 in the second week of March. The stock then jumped by about 14% by March 9 ending at Rs 1,702.

HDFC CEO Keki Mistry has communicated to the media, that the Chinese Bank has been a part of the firm’s existing shareholding pattern.

HDFC has been compelled to disclose the development as the stake holder PBOC now owns more than 1% of total equity. As per the regulatory requirement, a company has to disclose the stakeholder details owning more than 1% of the company. The 1.01% stake which is controlled by PBOC consists of a total of 17.49 million shares. 

PBOC move is unusual for a Central Bank

There were some concerns raised, as the country is reeling under a virus outbreak of COVID-19. The first spread of which was reported in Wuhan, China. And if the HDFC stake buy is a calculated move by the Chinese entity.  It is unusual for a Central Bank of the second largest economy owning a stake in India’s one of the largest financial institutions. A total of 70.88% stake of HDFC is held by Foreign Portfolio Investors (FPIs).

Huge sell off in Indian Equity Indices is a reflection of anticipated tepid economic growth due to COVID impact. Many Indian MOATs will be at considerably lower valuations, attracting attention from the Chinese and Other Foreign Investors (FPIs). Whether government comes up with some protective measures remains to be seen 

 

 

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