Agricultural Bank of China’s (AgBank, 中國農業銀行) massive initial public offering is on track to set a world record and reflects continued confidence in the world’s third-largest economy, analysts said yesterday.
AgBank — the last of China’s big four lenders to float — is set to raise US$22.1 billion this month if over-allotment options are exercised in both Hong Kong and Shanghai.
“If you need any evidence where the future of capital markets” lies, “it is the Agricultural Bank of China set to announce a record amount raised in an IPO,” Royal Bank of Scotland said in a research note.
“European banks could only dream of raising this much capital at the moment,” it said.
AgBank has set a price in Hong Kong of HK$3.20 per share, just above the middle of the expected range, Dow Jones Newswires reported.
In Shanghai, the price has been set at 2.68 yuan — the top of the expected range, the report said.
AgBank looked set to surpass previous IPO record holder Industrial and Commercial Bank of China’s (ICBC, 中國工商銀行) US$21.9 billion offering in 2006, but may fall short of its US$23.2 billion target.
“It is on track to be the largest IPO in the world this year due to the weak market sentiment domestically and internationally,” Shanghai Securities (上海證券) analyst Cai Junyi said.
“But whether it can overtake ICBC, we need to see how many shares will be issued in the end,” Cai said.
The bank in recent weeks scaled back its original US$30 billion target due to market volatility tied to concerns about the global economy and questions about a balance sheet dented by bad loans.
However, Shanghai-based Orient Securities (東方證券) analyst Jin Lin (金麟) said the bank’s exposure to inland China, which has economically lagged behind coastal regions, could also be seen as providing huge growth potential.
“AgBank has its advantage in rural China, which is different from the other major banks, making its shares attractive to some investors,” Jin said.
AgBank had said the stock would be priced between HK$2.88 and HK$3.48 a share. In Shanghai, the rural lender’s share sale had a price range of 2.52 yuan to 2.68 yuan.
The bank said it would publicly announce the price tomorrow.
Agbank aims to float 15 percent of its enlarged share capital, but if it fully exercises its over-allotment options, it could float 16.87 percent, according to its prospectus.
AgBank will also offer Japanese investors a portion of its shares ahead of its listings in Shanghai and Hong Kong, said Nomura Securities, one of the two lead underwriters in Japan.
“The offering will start on Monday, targeting Japanese investors,” Nomura spokesman Kenji Yamashita said.
The size of the Japan sale has yet to be decided, he said, adding that Daiwa Securities Capital Markets would be the other lead underwriter.
Citing an unnamed source, the Nikkei Shimbun reported that AgBank hoped to raise up to ¥50 billion (US$570 million) in Japan, where many wealthy investors are also following the growth outlook of the Chinese market.
Francis Lun (藺常念), general manager of Hong Kong’s Fulbright Securities (富昌證券), said Beijing was determined to make a success of the state-owned bank’s IPO.
“The central government is going all out to make sure [AgBank’s] IPO is a success,” he said. “They’re determined to make a good show. Otherwise they would lose face.”
RSS