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SCMP Reporter

Lender weighs identical pricing for its US$19b share offering in Hong Kong and Shanghai

Industrial and Commercial Bank of China, which is planning to raise as much as US$19 billion in a cross-border initial public offering, may set identical prices for  its A and H shares, according to market sources.

Mainland A shares have long traded at a premium to Hong Kong stocks, although the gap has been closing.

Limited opportunities to convert  the yuan into foreign currency and a lack of  investment options have kept demand for some shares higher than in Hong Kong.

The Shanghai Composite Index, for example, trades at 29 times earnings while Hong Kong's Hang Seng China Enterprises Index, which tracks H shares, trades at 14 times. The H-share index has risen 26 per cent this year while the Shanghai Composite Index is up 43 per cent.

The  sheer size of the ICBC IPO could make it easier for the bank to set one price in both markets.

'With the big issues with strong liquidity, the price gap is narrower, like for [Bank of China]. If you look at the gap in the price of the H shares and A shares, it's not as large as for some smaller issues,' said Ben Kwong, chief operating officer at KGI Securities..

Bank of China's H shares closed at $3.50 on Friday while its A shares  finished at 3.51 yuan.

Regulators have not yet signed off on the idea of identical pricing. 'They have their own agenda,' said one  source familiar with the situation.

ICBC has its sights on an initial public offering of US$15 billion to US$19 billion, surpassing the US$13.7 billion that Bank of China, the  country's second-largest financial institution, raised in Hong Kong and the mainland earlier this summer. The Bank of China share sale was the world's fourth-largest.

If priced at the top end of the estimated range, ICBC could become the world's largest float. That honour  belongs to Japan's NTT DoCoMo, the world's second-largest mobile phone operator, which raised US$18.4 billion in 1998.

To bolster its chances of success, ICBC is looking to Hong Kong tycoons - including Cheung Kong (Holdings) head Li Ka-shing, Henderson Land Development chairman Lee Shau-kee and New World Development chairman Cheng Yu-tung - to take a 10 per cent block of the Hong Kong-listed shares for US$1.3 billion.

The bank plans to offer 12 per cent of its enlarged share capital in Hong Kong and 6 per cent in Shanghai.

ICBC had previously expected to raise up to US$15 billion in Hong Kong alone but came under pressure from Beijing to do a simultaneous cross-border listing.

China's securities regulators, who are  at the final stages of a share reform programme that will convert non-tradable shares into ordinary equity, are keen to bolster the domestic stock markets.

High-profile sales by industry titans such as ICBC are a key part of their plans.

China Communications Construction Group, which builds ports, roads and airports, has also been directed to do a simultaneous cross-border  listing later this year. The firm is seeking US$2 billion.

The biggest mainland  companies have traditionally chosen to list in Hong Kong, either as mainland domiciled or H-share companies, or as so-called red chips after establishing themselves in offshore tax havens  such as the Cayman Islands.



ICBC eyes one price in dual float