HONG KONG - Singapore state investor Temasek Holdings launched a $3.7 billion sale in two Chinese state-owned banks late on Tuesday, according to a term sheet seen by IFR, in a move aimed at trimming its exposure to financial sector.

Temasek, which has about $152 billion under management, had about 37 percent invested in financial sector. A 19 percent stake in Standard Chartered Bank Plc and Singapore DBS Holdings are among its prominent holdings.

Fullerton Financial Holdings, a unit of Temasek, is offering to sell 5.19 billion shares Bank of China in a range of HK$3.60-3.67 ($46-47 cents) each, a discount of between 4.92-6.75 percent to Tuesday's close, the term sheet showed.

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Separately, Cairnhill Investments and Crescent Investments, two other Temasek units, were offering 1.5 billion shares in China Construction Bank at HK$6.22-$6.35 per share, or at a discount of 2.01-4.01 percent to their last traded price.

The funds are prohibited from selling further shares for three months, the sheet showed.

A Temasek spokesman declined to comment.

Temasek's offering of CCB shares comes less than a year after it agreed to buy a $1.55 billion stake by participating in the rights offer. Temasek also acquired Bank of America-Merrill Lynch's rights at that time.

The sale also comes ahead of the release of Temasek's annual report later this month. Temasek acquired stakes in Barclays and BofA during the financial crisis, though it has exited those stakes. Since then Temasek has been paring exposure to the financial sector.

On Tuesday, Moody's issued a warning of a possible ratings downgrade for Chinese banks due to their higher-than-expected exposure to local government debt.

Unless China comes up with a "clear master plan" to clean up the problem, the credit outlook for Chinese banks could turn negative, Moody's said earlier on Tuesday.

The warning helped depress bank shares in Hong Kong trading.

Morgan Stanley was the sole bookrunner.