China central bank hikes stake in HDFC amid a sharp correction in shares

The People’s Bank of China (PBoC) has increased its shareholding in Housing Development Finance Corporation (HDFC) amid a sharp correction in shares of India’s largest mortgage lender.

The Chinese central bank held 17.5 million shares (or 1.01 per cent) at the end of the March 2020 quarter, according to a regulatory disclosure by HDFC. 

Deepak Parekh, chairman, HDFC, said, “They buy on behalf of China’s sovereign wealth fund. We have to report information when the stake crosses 1 per cent.”

“PBoC has been an investor in HDFC for a while. It held 0.8 per cent in the company in March 2019 and now the shareholding has gone beyond 1 per cent in March 2020,” said Keki Mistry, vice-chairman and chief executive officer, HDFC. “They are passive investors,” he added.

Sources say PBoC may have increased its stake by 0.2 percentage points in March, when HDFC’s stock had come off 25 per cent amid a sharp sell-off in the market. 

 

 

On an overall basis, the shareholding of foreign portfolio investors in HDFC fell from 72.75 per cent in the December 2019 quarter to 70.88 per cent in March 2020.

Shares of HDFC had jumped 13.6 per cent last week to end at Rs 1,633. The stock is still down 29 per cent on a year-to-date basis. At the current market price, HDFC is valued at Rs 2.95 trillion. 

Besides being a home loan provider, HDFC is also the holding company with stake in group firms, including HDFC Bank, HDFC Mutual Fund, and HDFC Life Insurance.
 

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‘HDFC’ was among the top trends on Twitter on Sunday. The news of Chinese central bank’s stake disclosure led to a frenzy on social media. Some argued that China was lapping up shares of blue-chip Indian companies, taking advantage of the price correction.

However, experts dismissed this theory, saying there is nothing unusual in the acquisition.

Besides PBoC, there are few other central banks and sovereign wealth funds that hold stake in HDFC. These include Government of Singapore, Norges Bank, and Abu Dhabi government, according to Bloomberg data.

The Chinese sovereign wealth fund China Investment Corporation had nearly $1 trillion of investments at the end of 2018, said the latest available figures. 

Sources say the Chinese fund has picked up stake in other domestic companies in the March 2020 quarter. However, it may not reflect in the shareholding pattern if the shareholding on reporting date is below 1 per cent. 

Asset manager China International Fund Management has holdings in several large domestic companies, including Reliance Industries, Larsen & Toubro, ITC, Infosys, and Indian Oil Corporation, shows the data provided by Bloomberg.