- Title: CHINA: Subdued debut for AGBank shares on the Shanghai stock exchange
- Date: 16th July 2010
- Summary: BEIJING, CHINA (FILE) (REUTERS) EXTERIOR OF AGRICULTURAL BANK OF CHINA HEADQUARTERS WOMEN CHATTING OUTSIDE BANK EXTERIOR OF AGRICULTURAL BANK OF CHINA BRANCH SIGN OF AGRICULTURAL BANK OF CHINA INTERIOR OF BANK BRANCH
- Embargoed: 31st July 2010 13:00
- Location: China
- Country: China
- Topics: Finance
- Reuters ID: LVA5CSQMETJKBP0XHNHBT2U5J453
- Story Text: Agricultural Bank of China shares start trading on the Shanghai Stock Exchange.
The Agricultural Bank of China was listed on the Shanghai stock exchange on Thursday (July 15), but its lacklustre Shanghai debut is underscoring the challenges ahead for China's markets, as other big banks look to tap investors for billions of dollars in funds.
AgBank's debut caps off years of planning and preparation, completing its transformation from technical insolvency to a sprawling giant with assets of around $1.2 trillion and a customer base of 320 million -- larger than the population of the United States.
It comes against a less-than-ideal backdrop of a weak stock market, questions over economic growth and rival banks returning to capital markets to supplement their coffers after a lending spree last year.
AgBank shares were up 1.1 percent to 2.70 yuan ($0.40) in morning trading on Thursday, versus its IPO price of 2.68 yuan.
The bank took a low-key approach to its listing, not opening the ceremony to foreign media.
Chairman Xiang Junbo marked the occasion hitting a gong to inaugurate the trading of shares with Shanghai's party secretary Yu Zhengsheng.
The modest debut for China's third-largest bank by assets weighed on other banking stocks, limiting gains despite encouraging economic data that showed inflation stayed in check in June. The main stock index rose by 0.1 percent in mid-morning trade.
AgBank has a 5.3 percent weighting in the index, making it the third-biggest component of the index.
Analysts say they are now looking out on how the stock market would perform after such a massive listing.
"So we feel that what we are paying attention to is not just the simple point of the rise or fall of the stock price of the Agricultural Bank of China. More importantly, we are paying attention to the effects of the listing of such a major stock because it is practically looking to absorb funds from the secondary market. So the key for us is to pay attention to how this would affect the stock market overall,' said Major Teng, chief analyst for Everbright Securities in Shanghai.
Investors around the country watched the debut of the last of China's "Big Four" lenders to go public closely, looking for signs of whether the beleaguered stock market might find relief after shedding about a fourth of its value so far this year.
But Teng said he did not expect the listing to change of the dynamics of the bear market in Chinese stocks this year.
"Under the background of the uncertainty of policy tightening in the future as well as the dynamics of demand and supply, the stock market has gone down. The listing of the Agricultural Bank of China is just one important event in this falling market. Its listing does not change the factors causing this market correction, so we feel that this listing only changes the rhythm and pace of the stock market operation," he said.
A weak performance in its first days of trade could bode ill for upcoming fundraisings by peers including Industrial & Commercial Bank of China (ICBC) and Bank of China, who are returning to capital markets to raise tens of billions of dollars to supplement their capital.
AgBank, which is aiming to raise a record $22 billion after exercising an overallotment option, debuts in Hong Kong on Friday (July 16).
Still, some analysts said that a steady performance by AgBank in its first days was preferable to the surge in share prices that many Chinese companies have seen on their first day.
The debut bucked the typical trend, registering a much smaller price gain than its rival banks, whose shares jumped up to one-third in their first day of trading in Shanghai.
ICBC shares rose 5 percent on its first day of trading in Shanghai in October 2006, compared with 23 percent for Bank of China also in 2006 and 32 percent for China Construction Bank (CCB) in 2007. After exercising its over-allotment, ICBC raised $21.9 billion, which stands as the world largest IPO to date.
AgBank, now chaired by former soldier and scriptwriter Xiang Junbo, was founded by Mao Zedong in 1951 and now has some 441,000 employees in more than 23,000 branches.
Should the offering show strong demand in the first few weeks, China's third-largest lender will exercise an over-allotment, boosting the $19.3 billion raised last week by nearly $3 billion, making it the largest IPO ever.
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