BOC sold 25.57 billion shares at US$0.38, near the top of a conservative indicative range. Institutional investors oversubscribed the offering 20 times and retail investors 77 times. When the initial tally was done, the bank had raised US$9.7 billion. On June 1, the first day of trading, shares went up 15.3% to US$0.43 in US$2.58 billion worth of trades.
That same day, the Hang Seng index – like indexes across the region – declined 1.3%. The systemic downward slide did not affect BOC, which used an option to sell an additional 3.84 billion shares.
When all was said and done, the IPO became the fourth-largest on record at US$11.2 billion, trailing only NTT DoCoMo, Enel SpA and Deutsche Telekom AG.
BOC now plans to issue 10 billion renminbi-denominated A-shares in the Shanghai stock exchange to raise another US$2.5 billion. The listing was approved June 13, putting the bank on track for a late June or early July offering, setting the stage for the first major IPO since Beijing lifted the ban on new share listings imposed last year.
The strong showing from BOC bodes well for Industrial and Commercial Bank of China (ICBC). The bank, the country's largest lender ahead of BOC, was expected to formally apply late June for a September listing in Hong Kong that could be worth at least US$10 billion.
Such a performance would ensure that mainland companies beat the US$23 billion they raised through Hong Kong listings last year. By June 9 they were up to US$14.9 billion, well beyond the US$6 billion raised by the same point in 2005.
In addition to ICBC, China Merchants Bank is looking at a US$2 billion offering, a figure that could be matched by Shanghai Automotive Industry Corp. China National Coal seems likely to raise US$1 billion.
All clear sounded for new listings
China securities regulator green-lit new domestic IPOs after a year-long hiatus. The China Securities Regulatory Commission also released revised rules on public offerings. These were largely unchanged from an earlier draft but they do bar firms whose net profit came in 30% or more below forecasts from making public offerings for three years. The first offering was China CAMC Engineering which floated 60 million shares in Shanghai. More than 100 companies have scrambled to be among the first to get the nod for China IPOs.
Shares suffer record one-day slide
Mainland exchanges experienced their biggest one-day drop in more than four years on June 7 as investors dumped shares amid fears that a barrage of upcoming domestic listings would drain liquidity from the markets. The benchmark Shanghai composite index, which tracks A- and B-shares, finished at 1,589.6, a drop of 5.3%.
Banks get green light on insurance
China's banking regulator will allow banks to establish and directly invest in insurance businesses, and also support local insurance funds taking stakes in commercial banks. New regulations for bank cards, fund management by commercial banks, trust management and asset-backed securitization are also in the pipeline according to international media reports. The regulator hopes to encourage commercial banks to expand services and improve competitiveness ahead of the significant opening of the banking sector to foreign competition in December.
IFC goes west
The International Finance Corporation plans to review its investment strategy to include banks and rural cooperatives in China's massive but undeveloped western areas. Executive Vice-President Lars Thunell said the private arm of the World Bank would launch a second yuan-denominated "Panda" bond. The IFC has pumped funds into six Chinese banks in coastal areas and now plans to use the same turnaround techniques in less developed regions. "The desire for better governance and risk control is there," Thunell said. "Some banks have loss ratios of below 2%."
Citic names IPO participants
Citigroup, Lehman Brothers and HSBC have been tipped to participate in a US$2 billion initial public offering by China Citic Bank, the seventh-largest commercial lender on the mainland and the largest state-run investment company. A host of other competitors from the world's top international banks and financial houses dropped off or were dropped after real or perceived conflicts of interest. The company's Beijing-based Citic Securities and China International Capital, Morgan Stanley's mainland joint venture, will also participate in the IPO.
Rampant investment risky
The People's Bank of China may move to slow down lending by raising mandatory bank reserves and expanding open-market operations, state media reported, quoting the bank's annual report. The bank is concerned about the emerging negative impact of over-investment in some sectors and growing financial risks. The bank raised its benchmark lending rate for the first time in a year and a half and has not raised the bank reserve ratio since April 2004.
Banks told to slow lending
Higher down-payment requirements for mortgages on luxury housing were suggested by Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), in order to slow banks' real estate lending. He did not specify how large these down payments should be. Liu said banks should promote loans for first-time homebuyers but stop granting other types of loans. Property prices across 70 Chinese cities rose 5.5% in the first quarter over the same period in 2005. Meanwhile, China reported US$2.575 trillion in loans by the end of Q1, up 14.7% from 2005.