Agricultural Bank of China (AgBank, 中國農業銀行) rose modestly in trading on the Hong Kong stock exchange yesterday, despite a tepid reception in Shanghai, as the rural lender rolled out a massive initial public offering worth up to US$22.1 billion.
The last of China’s “big four” state-owned commercial lenders to list started trading at HK$3.25 — 1.6 percent above its offer price of HK$3.20. It rose to HK$3.31 in the first hour but fell to HK$3.27 by mid-afternoon.
The Hong Kong IPO marked the international portion of ABC’s dual-listing. Unlike the Shanghai bourse, the stock exchange in this semi-autonomous southern Chinese territory is open to foreign investors.
Major foreign investors include some of the territory’s biggest tycoons and also Qatar Investment Authority (US$2.8 billion), Kuwait Investment Authority (US$800 million), Britain’s Standard Chartered Bank (US$500 million), Dutch bank Radobank Nederland (US$250 million), Australia’s Seven Group Holdings Ltd (US$250 million) and Singapore’s Temasek Holdings (US$200 million).
On Thursday, Chinese investors were lukewarm toward the bank on its Shanghai debut, with the stock closing 1 percent above its IPO price at 2.71 yuan. It fell 0.4 percent yesterday, closing at 2.69 yuan.
The bank is seen as weaker and less profitable than its peers, given that it operates a costly network of far-flung rural branches and its non-performing loan ratio is higher than other major banks at about 3 percent. Bank executives, however, tout its strong presence in the countryside as an untapped engine for growth.
While Chinese banks are considered the world’s strongest after avoiding the credit turmoil in the West, local authorities have warned about a possible spike in bad loans after last year’s lending boom unleashed by a government stimulus plan. The ratings agency Fitch warned earlier this week that some Chinese banks may be downplaying the scale of their lending with complex deals.
Agricultural Bank chairman Xiang Junbo (項俊波) said yesterday he was happy with the market reaction given the current conditions. The bank had little choice in the timing of the listing because Chinese regulators ordered banks to replenish capital after last year’s lending spree.
“I think our stock has always been very popular. It hasn’t been unpopular. You should know better than I what state the global capital markets are in,” Xiang told reporters in Hong Kong shortly after listing ceremony yesterday.
“I’m very happy with the stock price today,” he said.
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