The bank stands to raise US$11.3 billion, making it the world's fourth-largest IPO Bank of China (BOC), the mainland's second-largest lender, has received strong demand from institutional investors for its US$9.8 billion initial public offering, which is set to be the largest ever in Hong Kong. The IPO is being launched to Hong Kong retail investors today. It has already been more than five times oversubscribed by institutional investors on up to US$9.3 billion worth of shares allotted to them up to yesterday, sources close to the deal said. About US$490 million of the shares have initially been set aside for retail investors, or 5 per cent of the total offering. This will be raised to 20 per cent if the retail portion is oversubscribed 100 times or more, which is likely, given strong retail orders for the IPO by Tianjin Port Development Holdings, which closed yesterday. The sources said the retail tranche of Tianjin Port's $1.08 billion deal was almost 1,700 times oversubscribed - a record in Hong Kong IPO history - and attracted $184.72 billion in subscription money. Brokers said investors who missed the chance to subscribe to Tianjin Port's shares might place their bets on BOC, which is fielding strong demand from fund managers trying to gain exposure to the mainland's promising banking sector but who failed to buy into two earlier offerings by major Chinese lenders. If the shares are priced at $3 each, the top end of an indicative range that starts at $2.50, and if the option to sell an additional 15 per cent more shares is exercised, BOC will raise US$11.3 billion, the world's fourth-largest IPO. BOC and the banks hired to handle the share sale - BOC International, Goldman Sachs and UBS - initially reserved 95 per cent of the 25.56 billion IPO shares for sale to institutional investors, which began submitting their subscriptions last Thursday. Typically, institutional orders are stronger during the second week of subscription, commonly known as the book-building process. Speaking on the eve of today's launch of the 1.27 billion shares to Hong Kong's retail investors, the bank's chairman, Xiao Gang, confirmed that the combined size of the H-share sale and a subsequent offering of yuan-denominated A-shares to the mainland public would not exceed 15 per cent of the bank's enlarged share capital. 'We would ensure the A-share IPO would be priced in a way that would not hurt the interests of our H-share investors,' Mr Xiao said. As the mainland's largest foreign exchange lender, BOC suffered a 4.8 billion yuan foreign exchange loss because of the 2.5 percent yuan appreciation against the US dollar last year. However, Mr Xiao said the accounting loss would not be reflected in the bank's profit and loss account as it would be booked into the equity account. It was solely the result of unhedged foreign currency capital, such as equity contributed by foreign strategic investors and BOC's investments in offshore subsidiaries, he said. 'There was no net foreign exchange exposure on the banking book and trading book,' Mr Xiao added.