So shares in Agricultural Bank of China are worth HK$3.20 each. That is the price set on the Hong Kong portion of the bank's global offering; towards the higher end of the proposed price range. The pricing is a triumph for ABC and its advisers. Coupled with a Shanghai offering priced at 2.68 yuan (HK$3.08) a share and an expected 15 per cent 'greenshoe' over-allotment option, the bank will have succeeded in its ambition of launching the world's biggest initial public offering, raising a total of HK$172.3 billion, or US$22.1 billion, surpassing even its sibling ICBC's monstrous US$21.9 billion deal back in 2006. The feat is all the more impressive considering the dismal market conditions. Thanks to Europe's debt crisis, risk aversion has shot through the roof recently and investors are running scared. In particular, they are shying away from international bank shares, understandably wary of their holdings of European government paper. Meanwhile, Shanghai's leading stock index is down 26 per cent over the year to date. And in Hong Kong, Chinese bank shares have slumped by between 6 and 13 per cent in anticipation of a flood of new issues after mainland banks went on a government-mandated lending spree last year which left their capital ratios sorely depleted. Within the past few days, the Bank of China has announced plans for a HK$69 billion rights issue, while ICBC is reported to be planning a HK$51 billion offering. Yet despite the lousy environment, ABC and its advisers succeeded in launching what promises to be the biggest share offering of all time, thanks to some deft marketing and some even more adroit sales of large blocks of shares to cornerstone investors. Notably, the Qatar Investment Authority pledged HK$22 billion, the Kuwait Investment Authority signed up for HK$6 billion, while Standard Chartered took HK$3.9 billion. Yet although cornerstone investors, and Middle Eastern sovereign wealth funds especially, have emerged as a major force recently in supporting big mainland issues like ABC's, not all of them are entirely happy about their involvement. 'We do have some doubts about the pricing,' the head of equity investment at one of the cornerstones admitted to Monitor last week. This could be dismissed as the usual carping by investors in any big offering, but in this case our doubter has a sound point. ABC's price of HK$3.20 a share means the offering values the bank at roughly 1.65 times book value. Considering that established sector rivals like Bank of China are trading at only 1.7 times book, that is generous, to say the least. The quality of ABC's loan book is dubious. A government bailout helped reduce the bank's official non-performing loan ratio from 24 per cent in 2007 to just 2.9 per cent at the end of last year. But according to its prospectus, the bank is carrying a further 325 billion yuan of loans classed as 'special mention' - or considered liable to turn bad. If they all did, the bank's non-performing loan ratio would rise to a hefty 10.8 per cent. Even worse, there is a suspicion among investors that these figures may give only a rear-view mirror perspective on the bank's asset quality. In response to government orders to support official stimulus spending, ABC blew out the size of its loan book by 33 per cent last year. Many of those loans were extended to local government-backed investment companies, which depend heavily on local government land sale revenues to meet their interest payments. Following central government measures to cool the mainland's red-hot real estate market, fears are growing that property prices may well decline by 20 per cent or more. That may be good for the overall sustainability of economic growth, but a steep decline in property prices will inevitably eat heavily into land sale revenues, jeopardising the ability of many local government investment companies to service their bank loans. A sharp rise in non-performing assets, and a steep drop in bank earnings, could follow. That may not bother ABC's sovereign wealth fund investors. In spending 'somebody else's money on somebody else', as economist Milton Friedman put it, they are not overly concerned with the quality of their purchase. But ABC's other investors should be anxious. Last year's lending binge proved that the mainland's state banks are more like arms of the finance ministry than true commercial operations. Small shareholders count for little, except as sources of fresh cash to top up capital ratios following government-approved lending sprees. As a result, ABC's pricing may have been a triumph for the issuer and its advisers, but it looks eye-wateringly expensive for ordinary investors.