Reports that Barclays is in talks with potential investors over a possible equity issue to raise up to £4bn in fresh capital has fuelled Asia’s rumour mill and speculation about the next big investment by regional sovereign wealth funds.
It also helped boost Barclays’ share price as much as 8.5 per cent on Monday morning, after the bank said the sale of shares is “under active consideration” and that May profit was “well ahead” of last year’s figure.
The Sunday Times reported at the weekend that Barclays’ idea would be to sell shares to big outside investors at a premium to the current price. The bank would then give existing shareholders the chance to buy some of those shares.
The move follows purchases last summer of stakes in Barclays by China Development Bank (a 3.03 per cent stake) and Temasek, the Singaporean SWF (2.06 per cent), in two tranches at prices of 720p and 740p a share. Both have since lost money on their Barclays investment — so why would they come back for more punishment? Not only that, but the “SWF backlash” is only growing and recent caution on the part of the funds suggests they are opting for low-key investment, often indirectly through investment funds.
Yet CDB and Temasek are among six big investors reported to be in talks with Barclays. Needless to say, neither SWF is commenting.
But for a rare — and unusually detailed - insight into China’s view on all this, we would draw attention to a recent report by the FT’s Henny Sender about CDB’s ill-fated plan to plough $5bn into Citigroup early this year.
As to why CDB — or Temasek, or any other SWF, would want to wade again into the fraught world of investing in western investment banks, Sender notes that CDB’s attack of last-minute nerves over Citi was partly due to the poor performance of its initial investment in Barclays and the dismal progress of the investment by China’s key SWF, China Investment Corp, in Blackstone Group.
But, she says, “as they look for the most attractive investments, the sovereign funds also find themselves competing ever more fiercely with each other”. As for Barclays - or any other troubled Western investment bank:
Chinese money is perhaps the most desirable, largely because of the centuries-old siren song of the Chinese market. Senior executives at supplicant banks say they like Chinese capital because they can present their China deals to the rest of the world as great strategic initiatives rather than merely a form of rescue finance.
