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Bank's HK$19b IPO pulls in the punters

Carol Chan

Investors hope for Bank of China repeat

China Merchants Bank, which opened its HK$19 billion initial public offering yesterday, attracted strong retail interest as investors anticipated a quick profit on its debut.

Investors queued outside popular distribution points among the 57 receiving bank branches early yesterday to receive an application form and prospectus.

Sources close to the sponsor said more than a million application forms were handed out, with another batch to be printed next week.

Many would-be buyers chose to borrow from brokerages to boost their chances of getting IPO shares. Five leading local brokerages reported margin orders totalling HK$17.5 billion yesterday - almost 20 times the HK$940.5 million worth of shares allocated for Hong Kong investors.

Brokerage KGI Asia received HK$7 billion in margin financing orders, while Sun Hung Kai Securities received orders worth HK$4.5 billion. Phillip Securities had orders worth HK$3.7 billion, Prudential Brokerage HK$1.3 billion and Bright Smart Securities HK$1 billion.

'Investor demand for Merchants Bank is very keen,' said Phillip Securities senior research analyst Stephen Tse Sze-chun.

Enthusiasm for the IPO was partly due to hopes the share performance would be as strong as Bank of China's listing in June, brokers said.

Bank of China's HK$75.4 billion IPO, the world's largest in six years, was 70 times oversubscribed. The mainland's third-largest lender by assets has seen its share price climb 15.25 per cent since its debut on June 1, outperforming the 9.59 per cent growth of the benchmark Hang Seng Index in the same period.

Merchants Bank is China's sixth-largest bank by assets. The Shenzhen-based lender is selling 2.2 billion H shares at HK$7.30 to HK$8.55 each, with just 5 per cent reserved for the public. A board lot of the offer, or 500 shares, costs HK$4,318.17, including brokerage fees and levies.

Under the clawback mechanism, the retail tranche will be raised to a maximum of 20 per cent of the offering if the IPO is 100 times oversubscribed. Brokers said there was a high chance each retail investor may not be able to get one board lot.

The IPO will close at noon on Wednesday, with the shares to be priced on Friday. They will start trading on September 22.

The State Administration of Foreign Exchange yesterday said it had approved the bank's quota of US$1 billion under the qualified domestic institutional investor scheme, allowing it to invest abroad in fixed-income products on behalf of clients.

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