The mainland's biggest lender, the Industrial and
Commercial Bank of China (ICBC), has set a lower-than-expected price for its
dual share sale in Hong Kong and Shanghai, the world's largest initial public
offering (IPO) worth as much as US$21 billion.
Money started flooding on to the ICBC's order book as soon as it began
accepting subscriptions yesterday. Sources said the lender has recorded enough
subscriptions for its institutional tranche, which is earmarked for corporate
investors.
The mainland's largest bank in terms of assets, loans and deposits, set an
indicative price range of HK$2.56 (33 US cents) to HK$3.07 (39 US cents) per
share, lower than original market estimate range.
The long-awaited offering is, however, still the world's largest public
offering in fund market history.
The price for 13 billion A shares on the Shanghai market will be the same in
yuan terms.
The proposed IPO price values the ICBC at around 1.9 times to 2.23 times its
book value this year, compared to a 2.6 times to 2.7 times estimation the lender
set when pre-marketing began two weeks ago.
"It's a massive offering at a bargain price and the participation of the
dominant investment banks and influential wealthy individuals will attract a lot
of interest from investors. It also has strong potential to become a major
component of the Hang Seng Index," said Andes Cheng, associate director of South
China Research Ltd, a Hong Kong-based research firm.
The Beijing-based bank, which started its road show yesterday, is reported to
have already attracted enough orders to cover the deal's institutional order
book in Hong Kong.
Various signs have shown that international investors are eagerly awaiting
the ICBC's listing, looking for a way into the mainland's lucrative banking
sector, which is bolstered by continuous economic growth and an increasing
number of wealthy mainlanders.
The Hong Kong dollar rebounded from a multi-week low early last week, as
global investors began to exchange the currency to subscribe to the ICBC shares.
Hong Kong-traded shares in other mainland lenders all dropped yesterday, as
"people cleared their stock for the ICBC," said Cheng.
However, "there is still a long way to go before the ICBC and other mainland
banks make the necessary reforms and become heavyweight international players in
the world banking industry, such as HSBC," added Cheng.
"The bank has, over the years, accumulated some problems such as relatively
poor risk management. And these issues won't be solved immediately right after
the offering."
Under the terms of the deal, the ICBC can increase the Hong Kong share offer,
depending on share buyers' demand, to 40.7 billion H shares, with the Shanghai
allotment similarly rising to 14.95 billion A shares.
The bank could raise about US$18 to US$21 billion in its dual-listing, and is
likely to overtake previous record breaking IPO profits of US$18.4 billion, made
by Japanese mobile phone operator NTT DoCoMo in 1998.
The ICBC is the third of China's "big four" banks to list cross border after
China Construction Bank, which floated in Hong Kong last year, and Bank of
China, which listed in Hong Kong in June and Shanghai in July.
The bank plans to sell 35.4 billion H shares, or 10.8 per cent of its
enlarged share capital, in Hong Kong and another 13 billion A shares, or 4 per
cent of its enlarged share capital, in Shanghai, making it the first ever
company to launch a public offering in two markets simultaneously.
It started taking orders from institutional investors yesterday and will open
the tranche for retail subscribers on October 16. The IPO price will be fixed on
October 17, and the marketing debut is scheduled for October 27.
(China Daily 10/10/2006 page10)
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