China Petroleum & Chemical's (Sinopec) 11.81 billion yuan (about HK$11.06 billion) initial public share offering is set to become the most heavily subscribed IPO in China's A-share market. The issue could temporarily lock up as much as 422 billion yuan of funds in pledged subscriptions. Sinopec, the mainland's second-largest oil company, has allocated more than 100 million 'placement numbers' to potential share subscribers, the Shanghai Stock Exchange said yesterday. Each placement number allows the holder to subscribe to 1,000 Sinopec shares, implying the total number of shares investors have pledged to buy has topped 100 billion - 119 times the 840 million indicative number of shares on offer. At a subscription price of 4.22 yuan each, Sinopec's placement is expected to freeze at least 422 billion yuan of pledged investment money, or more than twice the estimated investment needed to stage the 2008 Beijing Olympic Games. Retail investors pledged 401 billion yuan for the share offer of the mainland's first private bank, China Minsheng Bank, late last year and 302 billion yuan for the country's biggest cosmetics-maker, Shanghai Jahwa United early this year. The institutional portion of Sinopec's share offering has already been 29 times subscribed, assuming 1.98 billion shares, or 70 per cent of the total offering will be allocated to institutions. Analysts said the strong response was within expectations, given Sinopec's relatively low valuation and quality management. 'With a price-to-earnings ratio of 20 times, Sinopec is much cheaper than the overall A-share market's valuation of between 45 to 60 times,' an analyst said. Last December, Baoshan Iron & Steel (Baosteel) raised 7.7 billion in net proceeds from its A-share offering, at a price-to-earnings multiple of 18.6. The analyst expected share offerings at lower-than-overall market valuations by industry giants such as Sinopec, Baosteel and Petrochina would help 'cool down' the mainland's stock market, which saw large sums of investment funds chasing relatively few quality stocks. Petrochina earlier this year said it planned to break Sinopec's fund-raising record of 11.81 billion yuan in an upcoming A-share offering. The analyst said: 'The forthcoming giant share offerings by blue-chip firms will help drive down sky-high valuations and improve the quality of the overall market, which will facilitate development of China's fund management industry.' Sinopec has tentatively offered 30 per cent of the 2.8 billion shares for sale to retail investors, and the remainder to institutions. However, should the amount of pledged retail interest exceed the amount of shares for sale by more than 20 times, a 'plough-back' mechanism will be triggered to allocate more shares to retail investors at the expense of institutions. Under the mechanism, the proportion of shares allocated to retail investors will be raised to 55 per cent from 30 per cent when the level of interest is 25 times or less the amount of shares available. The remaining 45 per cent will be allocated to strategic and institutional investors. Ten strategic investors are expected to take up to 20 per cent of the total share offer, with half being bought by the National Social Security Fund. But their final allocation will also be subject to changes under the plough-back mechanism. The other nine include China's largest television-maker Sichuan Changhong Electronics, Ningbo Port Authority, China Ocean Shipping and Baosteel.