UPDATE 2-HSBC says won't cut holding in China's BoCom

(Rewrites with HSBC statement, details, background)

By Samuel Shen

SHANGHAI, Jan 8 (Reuters) - HSBC Holdings will not cut its strategic stake in China's Bank of Communications, the banks said on Thursday amid investor concern that more foreign institutions might sell their holdings in Chinese lenders.

In separate statements, London-based banking giant HSBC (HSBA.L: Quote, Profile, Research)(0005.HK: Quote, Profile, Research) and BoCom (3328.HK: Quote, Profile, Research)(601328.SS: Quote, Profile, Research), China's fifth-biggest bank, also said they had reaffirmed their long-term strategic relationship.

They promised to deepen their cooperation in areas such as credit cards, corporate business, payments and cash management.

"Despite the lock-up period for HSBC's investment in BoCom expiring in August 2008, HSBC confirms it has no intention to reduce its current 19.01 per cent shareholding in BoCom," HSBC said.

"This continued support fully complies with HSBC's dual growth strategy for mainland China, comprising organic growth and long-term investments in strategic partnerships such as that with BoCom."

Chinese bank shares dropped steeply this week after Bank of America (BAC.N: Quote, Profile, Research) sold part of its stake in China Construction Bank (0939.HK: Quote, Profile, Research), and a foundation controlled by Hong Kong tycoon Li Ka-shing unloaded shares in Bank of China (3988.HK: Quote, Profile, Research). The shares were worth a combined $3.3 billion.

Foreign institutions own large stakes in most of China's major listed banks, and investors fear further sales as the institutions raise money to cope with strains in the global financial system. Another motivation to sell may be pressure on Chinese banks' earnings as China's economy slows.