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Fri, Jul 16, 2010 - Page 10 News List

AgBank’s IPO makes weak debut


Agricultural Bank of China’s (AgBank, 中國農業銀行) record US$22 billion initial public offering (IPO) made a lackluster debut in Shanghai, underscoring the challenges ahead for China’s markets as other big banks look to tap investors for billions of dollars.

AgBank shares closed at 2.70 yuan (US$0.40) in Shanghai — up 0.75 percent from the IPO price of 2.68 yuan, but lower than the opening price of 2.74.

Analysts surveyed by reporters had expected the stock to gain about 5 percent or less. The Hong Kong shares list today and are seen making similarly modest gains.

“There’s a lot of profit-taking pressure from investors, who are not optimistic about the long-term prospects of China’s economy or the banking sector,” said Liu Jun (劉軍), analyst at Changjiang ­Securities (長江証券) in Wuhan.

“The debut reflects worries over slower growth and rising bad loans at Chinese lenders and continued weakness in the stock may prompt a renewed slump in the overall market.”

Yesterday, AgBank took a low-key approach to its listing, not opening the debut ceremony to foreign media.

Chairman Xiang Junbo (項俊波), a former soldier and scriptwriter, marked the occasion by giving a crystal model of AgBank’s Beijing headquarters to the head of the Shanghai Stock Exchange, who gave Xiang a bronze opening gong in return, live television pictures showed.

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, in part because of jitters over the massive AgBank offering.

At one brokerage in downtown Shanghai, individual investors, many of them retirees, swapped theories on how much the government was controlling the stock market while watching with disappointment as AgBank’s share price failed to take off.

“Apparently, investors think the AgBank IPO was overvalued and the only reason it isn’t falling is that it’s a political task to keep it above the IPO price,” said Qiu Zhicheng (邱志成), an analyst at Guosen Securities Co (國信証券) in Shanghai. “This is not good for other banks’ fundraisings going forward.”

However, some retail investors looked to AgBank’s modest day-one performance as a positive sign for the long run.

“A debut like this means the stock price will soon choose a direction and I think it’s more likely to rise,” said Tony Shu, a lawyer who bought 20,000 shares, worth about US$8,000, in the IPO. “I won’t sell AgBank until it reaches 3 yuan, which I think is very possible,” he said.

A weak performance in AgBank’s first days of trade could bode ill for upcoming fundraisings by peers including Industrial and Commercial Bank of China (中國工商銀行) and Bank of China (中國銀行), who are returning to capital markets to raise tens of billions of dollars to supplement their capital.

The “Big Four” will have a market capitalization of roughly US$680 billion if AgBank exercises its overallotment options, more than Turkey’s GDP last year.

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