The Hang Seng Index hit an all-time high yesterday as Hong Kong prepared for China's biggest bank to begin trading today in the world's largest initial public offering. The benchmark index closed 1.1 per cent higher at 18,353.74 on turnover of HK$33.8 billion, beating the record of 18,301.69 set in March 2000. Mainland firms including China Mobile and CNOOC led the charge. The index came within 19 points of its all-time intraday high. Fund managers expect shares in Industrial and Commercial Bank of China (ICBC) to open 15 per cent above their IPO price in Hong Kong and Shanghai, given the number of retail and institutional investors who failed to get shares in the heavily oversubscribed dual listing. Although the offering is set to be a winner, just a few months ago more than a few market professionals seriously doubted that ICBC would come to market this year, given the woes of mainland banks. Some still see the sale as a prime case of investors losing all touch with reality. 'These banks haven't changed that much yet,' said Fraser Howie, author of Privatizing China: The Stock Markets and Their Role in Corporate Reform. 'They have been restructured for an IPO, but the hardest work of building commercial risk management and credit-driven processes still needs to be done.' ICBC's bad loan ratio has officially dropped to 4.1 per cent, down from more than 20 per cent two years ago, a feat achieved only with the help of huge government bailouts and a liberal interpretation of the term 'non-performing'. Analysts say even a modest slowdown in the mainland's economic growth would lead to a sudden surge of bad loans at the state-controlled banks. Worryingly, such a slowdown is Beijing's main economic policy goal, since officials believe the pace of growth - at more than 10 per cent a year - is both unsustainable and incompatible with the goal of a 'harmonious society'. Even Liu Mingkang , the mainland's chief banking regulator, is issuing warnings on almost a weekly basis about the dangers of lax risk controls and weak corporate governance. 'There have been very substantial improvements in the last few years,' said Fitch Ratings banking analyst Charlene Chu. 'But the banking system still poses the biggest risk to the Chinese economy.'