Published September 26, 2008

Li Ka-shing snaps up Bank of East Asia shares, halts share slide

But BEA customers continue to withdraw deposits

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(HONG KONG) Shares in Bank of East Asia rebounded yesterday after its chairman and billionaire Li Ka-shing bought up stock, while hundreds of nervous customers continued to withdraw their savings despite the lender denying rumours of its financial instability.

Rumours spread on Wednesday via text messages and word of mouth that Hong Kong's No 5 lender had run into liquidity problems, prompting thousands of customers to camp overnight outside outlets and sending its stock down as much as 11 per cent, before closing down 7 per cent. Yesterday, the stock finished up 3.4 per cent at HK$26.

Chairman David Li said that both he and the tycoon who controls Cheung Kong and Hutchison Whampoa had bought Bank of East Asia shares on Wednesday in a signal of their support.

'He is very nice. He called me and said he did not understand why people do that,' chairman David Li said.

'He said he was very confident of Bank of East Asia and he bought shares,' Mr Li told reporters on television.

Analysts said that they were confident about the bank's liquidity and financial health after talking to Bank of East Asia's chief financial officer in a conference call on Wednesday night.

'In the very worst case, China can be ready to provide any support to our banking system, and Bank of East Asia is in fact too small to fall,' said Jasmine Lai, an analyst at DBS Vickers Securities.



Despite the reassurances, hundreds of people continued to queue outside Bank of East Asia branches yesterday morning, and some slept overnight outside outlets, hoping to be the first ones in.

'I don't have confidence any more as I happen to be a victim of Lehman Brothers and suffered losses on their products,' said a woman surnamed Leung who was among a crowd waiting outside one branch, adding that she had lost HK$200,000 (S$36,540) in Lehman bonds.

Others were more sanguine. 'I wouldn't say I'm very worried, but I want to avoid any risk,' said Henry Wong, a 50-year-old accountant who queued for 10 hours the day before and another two hours yesterday morning to retrieve all his money from the bank.

Only about HK$2 billion in deposits was withdrawn on Wednesday, representing 0.7 per cent of the bank's HK$300 billion deposit base, DBS Vickers estimated.

The Hong Kong Monetary Authority said that it will provide full liquidity support to Bank of East Asia, if necessary.

The de facto central bank injected HK$3.883 billion into the territory's interbank market yesterday, the second injection in less than two weeks, to soothe credit tightness amid the global financial crisis and the deposit outflow of Bank of East Asia. -- Reuters