China Everbright Bank, the nation's 13th largest bank (ranked by assets), is set to raise up to US$2.5 billion in what could be the largest initial public offering in Asia so far this year.
The issuer, founded in Beijing in 1992, attempted a US$6 billion flotation last summer, having listed in Shanghai in 2010. The deal was too ambitious, and its collapse was blamed - as usual in such cases - on market conditions.
The dramatic reduction in deal size should make it easier for investors to swallow. Meanwhile, the bank's share price has dropped 20 per cent in the past year. Given that the price of the Hong Kong offer will be referenced to the Shanghai trading level, this decline will make the offer cheaper to local investors and, therefore, more palatable.
China Everbright's latest offer is likely to price at a discount of up to 10 per cent from the Shanghai shares, as has been the case for recent Chinese IPOs with a prior listing on the mainland.
That's the good news. The bad news is that the external trading environment is choppy.
The VIX Index - which measures the volatility of share price moves and is popularly known as a 'fear index' - is at its highest level for four months thanks to the latest euro-zone conflagration.
China Everbright no doubt will try to shore up its offer by pre-selling a large part of the deal to a rich base of cornerstone investors, as has been common practise among new issuers of late. But given the fraught environment, the firm may find it tough to persuade key accounts to commit to staying invested in its stock for six months, a requirement for cornerstone arrangements in Hong Kong. The alternative is to sell shares to anchor investors (at an early stage, but without a formal agreement) or hither and thither during a wide-open marketing period, possibly amid a sell-off and high volatility.