Tough rules for beauty contest

Bank of Shanghai has been holding a 'beauty contest' over the past few weeks, with more than a dozen investment banks vying to underwrite its US$2 billion Hong Kong listing, expected early next year.

But the deal comes with a twist. The mid-size state-controlled bank has given potential underwriters a detailed list of 62 items it wants as a quid pro quo for a piece of the action, people familiar with the details said.

Among other things, the bank wants complimentary assistance for everything from upgrading its information technology to improving its trading systems to building its wealth management business. It's the kind of co-operation normally expected from a strategic investor rather than an underwriter of an initial public offering (IPO) of shares. And bankers are worried that if they agree to the demands - some of which they consider costly and potentially giving away some of their competitive edge - it could set a precedent for other mainland companies aiming to list.

'Since the market is really bad, competition has become extremely tough this year. The fact is every investment bank wants to get a major IPO deal like Bank of Shanghai, and that makes Bank of Shanghai really feel like God,' one of the people said.

Most of the demands on what's being called the '62-item list' have been carefully matched with specific banks' expertise. It's a bold precondition for what in the boom IPO years would have been considered a relatively small listing.

Most bankers, though, dare not complain, at least openly, fearing it could damage their chances of participating in the listing or harm business opportunities in the future.