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China Construction Bank shares fail to meet expectations

Shares in China Construction Bank (中國建設銀行), China's second-largest bank by assets, rose 32.3 percent yesterday in their first day of trading, falling short of expectations amid signs that a slew of share offerings may finally be beginning to sate investor demand.

The Beijing-based bank's initial public offering (IPO) on the Shanghai Stock Exchange raised 58 billion yuan (US$7.7 billion), a record for a mainland Chinese stock sale.

Construction Bank's shares rose by as much as 40 percent in early trading before closing at 8.53 yuan, up 32.3 percent from the IPO price.

`OVERESTIMATED'

"The market overestimated the price, for sure," said Chen Huiqin, an analyst with Huatai Securities (華泰證券) in Nanjing.

A double-digit gain was virtually assured -- most newly listed shares surge by at least that much in mainland China's frenzied markets these days, and analysts projected the stock would rise at least 40 percent on the first day's trading.

But with a slew of big IPOs hitting the market, the share gains did not match those of many previous big offerings. China Citic Bank (中國國際信託投資銀行), for example, jumped 96 percent when it debuted in Shanghai in April.

GAINS EXPECTED

Chen said that she expects Construction Bank's share price to make further gains.

"It takes time for new blue chips to stabilize," she said. "Almost all the bank IPOs have been through this process."

The Construction Bank, which already has shares traded in Hong Kong, issued 9 billion shares in its IPO and drew a record 2.26 trillion yuan in subscriptions, almost 40 times the amount it was trying to raise.

Massive demand for shares, especially from retail investors, has helped Shanghai's benchmark Composite Index more than double since the beginning of this year.

Yesterday was a fairly lackluster day for the market overall, with the Composite Index slipping 1.1 percent to 5,425.88 on declines in heavyweight airlines and banks.

Bank of America Corp holds an 8.19 percent stake in the Construction Bank after its stake was diluted by the IPO from 8.5 percent.

Construction Bank's Hong Kong-listed shares fell 5.3 percent to HK$7.10 (US$0.9) yesterday.
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