Keen interest expected in 20b yuan Shanghai listing despite costing more than Hong Kong flotation
The Bank of China set the price range of its mainland initial public offering at between 3.05 yuan and 3.15 yuan per share yesterday, slightly higher than its Hong Kong offer price but at a 9 per cent to 12 per cent discount on yesterday's closing price of the H share.
Analysts said they expected keen interest in the 20 billion yuan Shanghai listing.
They predicted the bank's A shares would be priced at the top end of the range and rise to at least the same level as its H shares on its debut on July 5.
At the top of its range, BOC would be priced at 2.18 times this year's book value.
'They need to price at a discount to the market to ensure this large bulk of shares will be absorbed,' Macquarie Securities head of China research Peter So said. 'But they also realise they can price higher than in Hong Kong because of the pent-up demand.'
The lender priced its Hong Kong flotation at $2.95 per share. The shares closed yesterday down 1.46 per cent at $3.375.
BOC, the second-largest lender in the mainland, raised US$11.2 billion from the Hong Kong listing, making it the fourth-largest flotation in the world.
The bank's listing is expected to be the biggest on the mainland and comes soon after the government lifted a year-long ban on new share sales.
The huge size of BOC's offering is partly to blame for the sharp correction in mainland stock markets in recent weeks as investors moved to release cash to bid for the lender's shares.
Analysts said the bank's listing would be a test of the rebound of the mainland stock markets, which has pushed the indices in Shanghai and Shenzhen up almost 60 per cent from the eight-year lows they fell to this time last year.
Trading volumes on mainland markets were the highest they have ever been last month, signalling the market had the liquidity needed to support a listing of the scale of BOC, they said.
The China Securities Regulatory Commission said trading volume reached 1.07 trillion yuan last month, a jump of 636 per cent from a year earlier.
Average daily turnover was 59.6 billion yuan, well over the roughly US$6 billion total that foreign investors are allowed to invest in the domestic A-share market through the qualified foreign institutional investor scheme.
The resumption of new stock sales has unleashed a flood of applications from companies hoping to raise capital.
The regulator announced yesterday it would consider the listing applications of Guizhou Crystal Chemical and Sinosteel Anhui Tianyuan Technology at a hearing next Friday.
If approved, both are likely to list on the small and medium boards in Shenzhen.
The commission also said it had rejected the listing application of Guangdong Ronsen Super Microwire on Friday, without giving a reason for the decision.