Agricultural Bank IPO faces tough run amid World Cup
If Agricultural Bank of China's initial public offering fails to become the world's biggest listing, the World Cup may be partly to blame.
The giant lender's share sale, which runs from today until Tuesday in Hong Kong, may attract less attention than other mega listings as retail punters remain glued to their television watching the world's biggest sporting event. Compared to the fervour that greeted Industrial and Commercial Bank of China's offering in 2006, ABC's share sale has been a damp squib.
The lender, the last of the Big Four mainland banks to list in the city, will offer 25.41 billion H shares at between HK$2.88 and HK$3.48 each. Trading will begin in Hong Kong on July 16, a day after the bank lists in Shanghai.
Should it be priced at the top end of the range, the H-share offering, plus its A-share listing, will raise a total of US$23 billion. That will top ICBC's record offering of US$22 billion in October 2006.
Brokers, however, said the lender might fail to beat that record if its offering was priced in the middle or low end because of the World Cup and poor market sentiment.
'We have had a few customers asking about the IPO but they are not really keen on making a big bet,' Christopher Cheung Wah-fung, chairman of Christfund Securities, said. 'They do not plan to borrow money to subscribe to the shares but only want to use cash on hand. The IPO has come at a wrong time as market sentiment is not good while the World Cup is going on.'
Cheung said many investors called to chat about the football but paid little attention to IPOs. 'They think they could earn more money from soccer betting than the IPO.'
ABC vice-chairman and president Zhang Yun, however, gave a more rosy picture at a briefing. He said the bank would deliver strong growth as its bad debts had decreased. The lender also boasted the largest retail customer base and network on the mainland, with 23,624 domestic branch outlets and 320 million retail customers.
'We are going to enjoy the fastest growth,' Zhang said. 'The wide network will enable us to sell insurance policies and provide other banking services.'
Joseph Tong Tang, executive director of Sun Hung Kai Financial, said brokers expected the ABC offering to be mainly bought by fund houses eyeing the long-term prospects of the stock rather than retail investors who want a quick profit.
'The retail response is cooler than expected,' Tong said. 'There are not many investors requesting margin financing.' Many recent IPOs failed to rise substantially while some fell below their IPO price on debut, he said. 'This is different from ICBC's listing in 2006, when many IPOs rose 10 to 20 per cent on debut.'
There were 969,298 applications for shares in ICBC in 2006, with most subscribing to the minimum one lot of shares. At the top end, 11 people subscribed for HK$1 billion worth of shares and three investors wanted HK$2.71 billion. The retail portion was initially 78 times oversubscribed with applications totalling HK$423.7 billion, leading the bank to double the retail portion later.
Kenny Lee Yiu-sun, chief executive of First China Securities, said ICBC's IPO was the hottest offer of the time. 'Investors kept asking about ICBC several months before its offering in October 2006,' Lee said. 'Many investors opened new accounts for family members in a bid to increase the chance of allotment. So far, we have not seen many investors opening new accounts for the ABC offering.'
Police in 2007 arrested 18 people for submitting multiple applications for the ICBC offer and other listings. Four people were sentenced to nine months in jail over a scam to steal other people's identity to apply for IPOs without their consent.
