SEOUL—South Korea's sovereign-wealth fund is considering investing the remainder of a dividend it received from Bank of America Corp. to increase its stake in the U.S. banking giant from 0.67%, and it will address its investment plans at a meeting Wednesday, people familiar with the matter said Friday.
Word of the possible investment comes after Korea Investment Corp., which invests funds from the Ministry of Strategy and Finance and the Bank of Korea, reinvested $78 million of the $145 million in dividends it has received from Bank of America in several transactions earlier this year.
Those purchases—combined with its holdings from a $2 billion investment in Merrill Lynch in 2008, which were converted to Bank of America shares after the U.S. lender bought the investment bank—give KIC 69 million Bank of America shares.
"KIC will report its consideration (of a further purchase of Bank of America shares) at a committee meeting due Wednesday and hear what its advisers have to say," one of the people familiar with the matter told Dow Jones Newswires. KIC generally sounds out the finance ministry, central bank and advisers from the private sector before making investment decisions.
The people said KIC feels that Bank of America is significantly undervalued and would yield a good return in the future. They didn't say how big KIC's stake would be after a possible investment.
However, further investments could face political resistance in South Korea as KIC's previous investments in the U.S. bank have yielded heavy losses. KIC has responded that the performance of its investments should be assessed over a longer term.
The U.S. banking sector has been under heavy pressure to bolster its finances as economic growth in the country slows. Bank of America has been selling off noncore businesses, but its shares have been hit by a slew of mortgage-related losses and lawsuits, and after its credit ratings were cut by Moody's Investors Service this week.
Separately, KIC said in a statement Friday it will decide what to do with the remainder of the dividend after closely monitoring global economic and financial market conditions.
The fund was responding to earlier media reports citing KIC Chief Executive Choi Chong-suk as saying the fund was planning to buy more Bank of America shares.
KIC had a net asset value of $43.01 billion at the end of April.
Source: http://online.wsj.com
Word of the possible investment comes after Korea Investment Corp., which invests funds from the Ministry of Strategy and Finance and the Bank of Korea, reinvested $78 million of the $145 million in dividends it has received from Bank of America in several transactions earlier this year.
Those purchases—combined with its holdings from a $2 billion investment in Merrill Lynch in 2008, which were converted to Bank of America shares after the U.S. lender bought the investment bank—give KIC 69 million Bank of America shares.
"KIC will report its consideration (of a further purchase of Bank of America shares) at a committee meeting due Wednesday and hear what its advisers have to say," one of the people familiar with the matter told Dow Jones Newswires. KIC generally sounds out the finance ministry, central bank and advisers from the private sector before making investment decisions.
The people said KIC feels that Bank of America is significantly undervalued and would yield a good return in the future. They didn't say how big KIC's stake would be after a possible investment.
However, further investments could face political resistance in South Korea as KIC's previous investments in the U.S. bank have yielded heavy losses. KIC has responded that the performance of its investments should be assessed over a longer term.
The U.S. banking sector has been under heavy pressure to bolster its finances as economic growth in the country slows. Bank of America has been selling off noncore businesses, but its shares have been hit by a slew of mortgage-related losses and lawsuits, and after its credit ratings were cut by Moody's Investors Service this week.
Separately, KIC said in a statement Friday it will decide what to do with the remainder of the dividend after closely monitoring global economic and financial market conditions.
The fund was responding to earlier media reports citing KIC Chief Executive Choi Chong-suk as saying the fund was planning to buy more Bank of America shares.
KIC had a net asset value of $43.01 billion at the end of April.
Source: http://online.wsj.com
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