Retail crowd shows muted interest in AgBank IPO
Thursday, 1 July 2010
HONG KONG, June 30 (Reuters): A steady stream of individual investors headed to bank branches here Wednesday to collect forms and documents for the more than $20 billion initial public offering planned by Agricultural Bank of China.
While foot traffic at HSBC's Kwun Tong branch indicated decent interest on the street in China's third-largest bank, it was hardly the frenzy that has greeted other large Chinese bank offerings.
"I plan to subscribe to HK$20,000," said a middle-aged woman surnamed Sun, who arrived shortly after the bank branch opened at 9 am. The housewife said she had previously bought shares of Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB) when they went public, and compared to those Chinese banks, AgBank was cheap in terms of valuation.
The view on valuation is the critical element of AgBank's deal, which, if it exceeds the $21.9 billion that ICBC raised in 2006, will be the world's largest-ever IPO.
How much the Beijing-based bank raises is important for the lender in terms of giving it an adequate capital cushion and is also key for China as a whole, as it will signal investor appetite for one of the country's key sectors.
Shanghai's benchmark stock index fell 4 per cent Tuesday, partly as a result of liquidity concerns and preparations for the AgBank deal, a signal of how important the IPO is for this market.
AgBank's price-to-book valuation of 1.5 to 1.7 times is cheaper than ICBC and CCB, but it's about the same or slightly higher than that of Bank of China -- the country's fourth-largest lender.
AgBank's heavy exposure to rural China and its historically high non-performing loan book has some investors worried as the IPO enters the final weeks.
While foot traffic at HSBC's Kwun Tong branch indicated decent interest on the street in China's third-largest bank, it was hardly the frenzy that has greeted other large Chinese bank offerings.
"I plan to subscribe to HK$20,000," said a middle-aged woman surnamed Sun, who arrived shortly after the bank branch opened at 9 am. The housewife said she had previously bought shares of Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB) when they went public, and compared to those Chinese banks, AgBank was cheap in terms of valuation.
The view on valuation is the critical element of AgBank's deal, which, if it exceeds the $21.9 billion that ICBC raised in 2006, will be the world's largest-ever IPO.
How much the Beijing-based bank raises is important for the lender in terms of giving it an adequate capital cushion and is also key for China as a whole, as it will signal investor appetite for one of the country's key sectors.
Shanghai's benchmark stock index fell 4 per cent Tuesday, partly as a result of liquidity concerns and preparations for the AgBank deal, a signal of how important the IPO is for this market.
AgBank's price-to-book valuation of 1.5 to 1.7 times is cheaper than ICBC and CCB, but it's about the same or slightly higher than that of Bank of China -- the country's fourth-largest lender.
AgBank's heavy exposure to rural China and its historically high non-performing loan book has some investors worried as the IPO enters the final weeks.