Bank of China Limited's (HKG:3988) top owners are sovereign wealth funds with 64% stake, while 24% is held by individual investors

By
Simply Wall St
Published
January 18, 2022
SEHK:3988
Source: Shutterstock

Every investor in Bank of China Limited (HKG:3988) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 64% to be precise, is sovereign wealth funds. Put another way, the group faces the maximum upside potential (or downside risk).

And individual investors on the other hand have a 24% ownership in the company.

Let's take a closer look to see what the different types of shareholders can tell us about Bank of China.

View our latest analysis for Bank of China

ownership-breakdown
SEHK:3988 Ownership Breakdown January 18th 2022

What Does The Institutional Ownership Tell Us About Bank of China?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Bank of China does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Bank of China's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
SEHK:3988 Earnings and Revenue Growth January 18th 2022

Hedge funds don't have many shares in Bank of China. Our data shows that Central Huijin Investment Ltd. is the largest shareholder with 64% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. China Securities Finance Corp, Asset Management Arm is the second largest shareholder owning 2.9% of common stock, and National Council for Social Security Fund holds about 2.0% of the company stock.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Bank of China

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that Bank of China Limited insiders own under 1% of the company. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own HK$36k worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 24% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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