Bank of China <3988.HK> <601988.SS> said its bid to raise up to $8.9 billion should give it enough capital for the next three years, seeking to assure markets its second major fund-raising this year will mend its stretched balance sheet for the foreseeable future.

Bank of China's move caught many off guard in part because it comes just as Agricultural Bank of China , the nation's No.3 lender, is preparing to launch an IPO in Shanghai and Hong Kong, expected to raise $20 billion or more later this week.

Most of China's top banks have announced plans to tap capital markets -- aiming to raise more than $70 billion combined -- to replenish their capital levels that were depleted after the record, government-directed lending of last year and to meet tighter capital adequacy ratios demanded by regulators.

Bank of China, the country's fourth-largest bank, said late on Friday it planned to raise up to 60 billion yuan ($8.9 billion) through a rights offer in Shanghai and Hong Kong, which would see shareholders get up to 1.1 rights shares for every 10 shares held.

Bank of China's fundraising plan caught me by surprise as they previously ruled out the possibility of additional sales of A-shares, and the market is apparently frightened, said Ye Yunyan, an analyst at Galaxy Securities.

The unexpected announcement also comes amid mounting talk that China could take steps to support its stock market, which is down 28 percent year to date, making it the world's second-worst performer after Greece.

One such step, which China has resorted to several times in the past, could be a freeze on new fundraising in Shanghai by locally listed companies.

In an investor call on Monday, the bank said it aimed to complete the rights offer by year end, and that it expected no further need for additional fundraising in the next three years, according to several analysts on the call.

A Bank of China spokeswoman could not immediately confirm details from the call.

Bank of China's Hong Kong-listed shares were down 1.5 percent on Monday, and its Shanghai-listed shares were down 0.9 percent in afternoon trade following a suspension on Friday.

Even as Bank of China pushed forward with its plan, AgBank held its own online roadshow on Monday, telling investors that big insurance firms and agricultural companies are among those buying strategic stakes for its Shanghai listing.

AgBank, the last of China's big four banks to go public, is selling shares in Shanghai and Hong Kong to raise as much as $23 billion in what could be the world's biggest IPO, as the lender seeks to replenish capital and drive growth.

Many institutional investors have or will book rights issues of Bank of China and AgBank's IPO, said Vincent Ho, manager of the new BRICs 5 Fund at JPMorgan in Taiwan.

It's a good timing to invest in Bank of China and other Chinese banking shares, because valuation-wise, they are very attractive, he said of China banks, whose shares have dropped sharply this year on fund-raising concerns.

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Despite the close timing, analysts said the two fundraising plans were not likely to fall too close together, as Bank of China's plan still required shareholder approval and was likely to be at least a month before it could proceed.

And the two largest, Industrial and Commercial Bank of China <1398.HK><601398.SS> and China Construction Bank <0939.HK><600939.SS>, whose capital positions are stronger than Bank of China's and AgBank's, have indicated they could put off their massive cash raising plans to as late as next year if necessary, according to executives and media reports.

In its investor call, Bank of China said it expected its capital adequacy ratio to be stable at about 12 percent for the next three years after collecting new funds from the rights issue, analysts said.

Combined with a $5.9 billion convertible bond issue in Shanghai last month, the new rights issue could bring Bank of China's fundraising activities this year to nearly $15 billion.

The total amount of the fund-raising is within our expectations, the surprise is mainly on the timing and the amount targeted for the A-share market, said Victor Feng, an analyst with Everbright Securities.

Assuming the placement was fully implemented, the bank's ... capital adequacy ratio will be raised by 1 percentage point, which is enough to sustain the bank's operations for the next three years, he said, adding CAR now stands at 11.09 percent versus a government-mandated minimum of 11.5 percent.

Despite its large size, the fundraising should also have less market impact than its large numbers imply because many of the new shares would presumably be purchased by the bank's largest shareholder, Central Huijin Investment Co, a government entity that holds about 68 percent of the bank.

If Huijin fully participates in the share placement, the amount that goes to the market will actually be much smaller than the targeted 60 billion yuan, said Everbright's Feng.

In its Friday announcement, Bank of China did not specify prices for the rights offering. Analysts said that based on past experience with other Chinese banks, the rights should be priced at a discount of 30-40 percent to the bank's current share price.

(Additional reporting by Samuel Shen and Aipeng Soo in Shanghai; Michael Wei in Beijing; Kelvin Soh and Clare Jim in Hong Kong; and Faith Hung in Taipei; Editing by Chris Lewis and Muralikumar Anantharaman)

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