Application may be made this week after key hurdle overcome, sources say The Bank of China (BOC) has secured key approval from the State Council to launch a $60 billion Hong Kong initial public offering in the first half of this year, sources close to the situation have revealed. The cabinet approval, secured last week, is a blow to domestic opponents of the listing plan who had sought to delay the H-share offering of China's second-largest lender by assets, pending a simultaneous domestic A-share offering. Objection to BOC's Hong Kong IPO comes against the backdrop of an intense debate on whether foreign institutions are profiting disproportionately from the privatisation of the country's largest banks by taking significant stakes before the share sales are completed. BOC's listing plan awaited a final go-ahead from the China Securities Regulatory Commission, the sources said. Barring commission objections, BOC may file a preliminary listing application with Hong Kong Exchanges and Clearing as soon as this week to sell new shares representing at least 8 per cent of its enlarged share capital during the IPO. The ratio is expected to increase to 15 per cent, resulting in US$8 billion being raised. The offering, which BOC previously planned to complete before April, was now most likely to be launched in May, sources said. BOC, which controls 14 per cent of the mainland's deposit base and 12 per cent of its loan market, is one of the Big Four state banks. Beijing hopes overseas listings will force improvements in corporate governance and management before the country throws open its heavily protected banking market to fully fledged foreign competition by the end of this year. Bank of Communications and China Construction Bank - the mainland's fifth- and third-largest lenders by assets - became the first to go public in Hong Kong last year. As the watchdog of the domestic securities market, whose value has nearly halved since mid-2001, the regulatory commission wants to attract more quality state giants to sell shares domestically, improving the quality of the domestic line-up of listed companies and allowing mainland investors to share in the capital gains. Mainland banks are already fighting accusations that they sold shares too cheaply to pre-IPO foreign investors. 'State-owned commercial banks should take into consideration the need to develop the domestic capital markets as they pursue offshore listings,' Xie Ping, general manager of BOC's dominant state shareholder, China SAFE Investments, said on Saturday, in an apparent attempt to address these concerns. 'Whenever market conditions permit, state banks should go public domestically.' Ultimately, the advanced stage of BOC listing preparations and a suspension of domestic new listings since last June - to allow the reform of non-traded state shares - seems likely to rule out further obstruction of the listing. At $60 billion, the offering will value the bank at 400 billion yuan, a rather conservative figure for a lender that had a net asset value of about 260.7 billion yuan at the end of June last year. Construction Bank last year priced its IPO shares at 1.96 times book value.