Chongqing Rural Commercial Bank Co (重慶農村商銀) shares fell on the first day of trading in Hong Kong after the company raised HK$11.5 billion (US$1.48 billion) in the territory’s fifth-largest initial public offering (IPO) this year.
The shares reversed earlier gains, declining 3.2 percent to HK$5.08 at the morning close after advancing by as much as 4.6 percent from the IPO price of HK$5.25.
“Chongqing’s non-performing loan ratio is higher than other listed Chinese banks and that’s a concern to investors,” said Louis Wong, a director at Phillip Securities HK Ltd.
Its ratio of non-performing assets stood at 2.99 percent as of June 30, the highest among its publicly traded peers.
The bank braved an 8 percent drop in the benchmark Hang Seng Index from a Nov. 8 peak that forced companies including Huaneng Renewables Corp (華能新能源) to cancel or delay IPOs.
The Chinese government stepped up measures over the past two months to drain liquidity and contain inflation, saying on Dec. 3 the country would shift to a “prudent” monetary policy next year from a “moderately loose” stance.
Huaneng Renewables, a unit of China’s biggest electricity producer, scrapped its first-time share sale on Monday because of unexpected and excessive market volatility. The company was seeking as much as US$1.3 billion.
Chongqing Bank is the first Chinese lender since Agricultural Bank of China Ltd (中國農民銀行) to go public in Hong Kong. It’s the ninth and smallest Chinese bank to list in the city.
“Some investors could have switched their investment to Agricultural Bank of China from Chongqing Bank,” said Linus Yip, chief strategist at First Shanghai Securities Ltd in Hong Kong. “Once the share price falls below the IPO price, it will take three to four days to ease the technical selling pressure.”
Agricultural Bank climbed 2 percent to HK$4.09 at the lunch break in Hong Kong.
Fubon Life Insurance Co (富邦人壽), Chow Tai Fook Nominee Ltd, Nexus Capital Investing Ltd and Value Partners Ltd are among institutional investors that bought stock in the Chongqing Bank IPO.
Chongqing Bank was established in June 2008 after the government merged rural cooperatives in the region. Based in Chongqing, China’s most populous city, it had 62,000 corporate and 17.5 million retail customers, according to the prospectus.
Chongqing’s economic growth averaged 18.2 percent on a nominal basis over the past three years, compared with the national rate of 13.2 percent, according to government figures cited in the prospectus.
The bank, with 1,763 outlets in Chongqing, had 262 billion yuan (US$39 billion) of assets as of June 30. It forecasts profit of at least 2.85 billion yuan this year, an increase of 51 percent from last year.