2010-06-07 08:56

Too many variables at stake to fix value ahead of mid-July flotation

BEIJING - While the Agricultural Bank of China (ABC) prepares for a mega-float in mid July, analysts and bankers close to the listing are saying it is still too early to hazard an intelligent guess at the offering price.

A customer leaves a branch of the Agricultural Bank of China in Beijing. Sources indicated the bank was likely to seek Shanghai and Hong Kong listing committee approval on Thursday. [DAVID G. MCINTYRE / BLOOMBERG]

Sources indicated the bank was likely to seek Shanghai and Hong Kong listing committee approval on Thursday. Speculation has been rife over how much shares in the country's third largest lender by assets will go for. It is expected to become the world's largest initial public offering (IPO) and will largely complete China's decade-long overhaul of government banks.

"The lender is yet to fix its issue price because it can only be decided after making road shows. There are several factors - such as the company's growth prospects, investor demand and market conditions - being taken into consideration," said Pan Gongsheng, vice-president of the bank.

ABC plans to issue up to 51.4 billion shares in its mid-July float, accounting for 16 percent of its total capitalization, even though the size is still subject to the development of market conditions, sources with knowledge of the matter told China Business Weekly.

Related readings:  Regulator to review ABC's IPO application   ABC likely to issue 51.4m shares in IPO  Mideast sovereign funds eye AgBank IPO  ABC listing may be cleared in early June

With several major lenders lining up to raise funds from the market after the record credit expansion last year, ABC wants its float to hit the bourse ahead of its Chinese peers. However, recent volatility in the market has cast a shadow over the outlook of the listing.

The Shanghai Composite Index has dropped some 19 percent since mid-April on concerns that stringent tightening measures might drag down economic growth, while Hong Kong's benchmark Hang Seng Index has declined some 8 percent over the same period over fears of fallout from the European fiscal crisis.

However, analysts said the correction in the markets made ABC's shares more attractive to investors, since Chinese banking shares are now trading at lower price-to-book multiples.