- Title: CHINA/FILE: Agricultural Bank of China IPO gets muted response in Hong Kong
- Date: 1st July 2010
- Summary: HONG KONG, CHINA (JUNE 30,2010) (REUTERS) VARIOUS OF CROWDS OUTSIDE HSBC BANK PEOPLE ENTERING HSBC SECURITY GUARD HANDING OUT IPO PROSPECTUS (SOUNDBITE) (Cantonese) HONG KONG INVESTOR, MR. KWOK, SAYING: "I think it will be the same as the other banks with share prices going up very quickly after listing. The share price AgBank is offering is quite reasonable. I am going to invest about HK$300,000 (US$38,500) in AgBank." IPO PROSPECTUS IN PILES SECURITY HANDING OUT PROSPECTUS (SOUNDBITE) (Cantonese) HONG KONG INVESTOR, MISS YAU, SAYING: "I am not afraid, banks should be OK, I think. I have confidence in AgBank." IPO PROSPECTUS INVESTORS ENTERING BANK HSBC BANK VARIOUS OF FULLBRIGHT SECURITIES GENERAL MANAGER, FRANCIS LUN (SOUNDBITE) (English) FULLBRIGHT SECURITIES GENERAL MANAGER, FRANCIS LUN, SAYING: "Of course the main concern is really the ongoing credit crisis in Europe. The sovereign risk. Greece can't repay their debt even though the Central Bank and IMF announced a 750 billion euro facility has still not restored the confidence of the financial markets. So that is why the response has been rather muted." FULLBRIGHT SECURITIES GENERAL MANAGER, FRANCIS LUN, FULLBRIGHT SECURITIES GENERAL MANAGER, FRANCIS LUN, SAYING: "So the market's betting that ABC IPO will be a huge success for ABC. The money it will raise from the IPO, it will improve its management and improve the profitability. I think investors can look to the same return for ICBC which is almost doubling in three years."
- Embargoed: 16th July 2010 13:00
- Keywords:
- Topics: Finance
- Reuters ID: LVACPHYKGLIJC6LGUI4FVJ5ZNAJ2
- Story Text: Agricultural Bank of China opened the retail portion of its IPO in Hong Kong on Wednesday (June 30), attracting a steady stream of investors prepared to brave weak markets and concerns demand for the roughly $20 billion offer.
Individual investors headed to local bank branches to pick up offer documents, and while foot traffic at HSBC's Kwun Tong branch in eastern Kowloon indicated decent interest in China's third-largest bank, it was hardly the frenzy that has greeted other large Chinese bank offerings.
Individual investors seem undeterred however, despite a more muted turnout than other Hong Kong IPOs.
"I think it will be the same as the other banks with share prices going up very quickly after listing. The share price AgBank is offering is quite reasonable," said Mr. Kwok who planned to invest US$38,500 in AgBank.
"I am not afraid, banks should be OK, I think," said Miss Yau. "I have cofidence in AgBank."
The view on valuation is the critical element of AgBank's deal, which, if it exceeds the $21.9 billion that ICBC raised in 2006, will be the world's largest-ever IPO.
How much the Beijing-based bank raises is important for the lender in terms of giving it an adequate capital cushion and is also key for China as a whole, as it will signal investor appetite for one of the country's key sectors.
Shanghai's benchmark stock index fell 4 percent on Tuesday, partly as a result of liquidity concerns and preparations for the AgBank deal, a signal of how important the IPO is for this market.
China's stock market had fallen around 20 percent from mid-April until a week ago, and dropped further on Tuesday (June 29). But that has not completely deterred retail investors, who are allowed to subscribe to at least 5 percent of the Hong Kong IPO and as much as 15 percent, depending on demand.
"Of course the main concern is really the ongoing credit crisis in Europe. The sovereign risk. Greece can't repay their debt even though the Central Bank and IMF announced a 750 billion euro facility has still not restored the confidence of the financial markets," said Fullbright Securities general manager, Francis Lun.
"So that is why the response has been rather muted," he added.
When the Industrial Commercial Bank of China (ICBC) went public, queues at bank branches went out the door and around the corner, with police and security called in to maintain order, but the offering of China's largest bank by assets came during a bull market.
AgBank's heavy exposure to rural China and its historically high non-performing loan book has some investors worried as the IPO enters the final weeks.
Lun said that when ICBC launched its IPO in 2008, it faced similar criticisms to the of AgBank, including bad management and exposure to bad debts.
But the money raised from the IPO transformed ICBC into one of the world's biggest banks.
"So the market's betting that ABC IPO will be a huge success for ABC. The money it will raise from the IPO, it will improve its management and improve the profitability," said Lun.
"I think investors can look to the same return for ICBC which is almost doubling in three years," he added.
For institutional investors seeking exposure to the Chinese market, and a lift for their portfolios, the jury is still out on AgBank.
Global markets are dropping along with China's stock market, on liquidity concerns, the euro zone sovereign debt crisis, and other factors.
AgBank prices will be set or around July 6, allowing plenty of time for a market pick-up or drop ahead of the July 15 debut in Shanghai. It plans to list on July 16 in Hong Kong.
Corporations known as cornerstone investors have bought up more than $5 billion of the Hong Kong offering already, a deal aimed at raising up to $11.4 billion excluding a 15 percent over-allotment of shares. The Shanghai deal is aimed at raising just under that amount. - Copyright Holder: REUTERS
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