Money
ABC's HK offer 10 times oversubscribed by institutions
(Agencies)
Updated: 2010-07-01 16:43
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SHANGHAI/HONG KONG: Agricultural Bank of China's Hong Kong share offering has been more than 10 times oversubscribed by institutional investors, signaling their healthy interest in the dual-market listing that could end up being the world's largest ever.
Agricultural Bank of China (ABC), whose Shanghai-Hong Kong listing aims to raise more than $20 billion, has received bids from institutional investors worth around $50 billion for its Hong Kong offering, a source with direct knowledge of the situation told Reuters on Thursday.
The offering was 3.5 times oversubscribed even on the first day of the bookbuilding, which started a week ago.
In contrast, individual investors showed muted interest in ABC's Hong Kong IPO on Wednesday when the offering was opened to them. Hong Kong markets were closed on Thursday for a holiday.
"Institutional investors take a long-term view and see ABC as a proxy for China's steady economic growth," said Yu Wei, an analyst at Guoyuan Securities Co in Shanghai.
"Retail investors in both Hong Kong and China are more interested in quick profits and won't scramble after shares of such a big bank in a bear market."
ABC, which has more than 350 million customers, exceeding the population of the United States, started taking subscriptions from Chinese institutions on Thursday for the Shanghai A-share portion of its IPO. That will be open to retail investors on July 6.
Valuation
ABC, the last of China's "big four" state banks to go public, aims to raise up to $11.4 billion in Hong Kong, excluding a greenshoe option that could expand the offering by 15 percent.
Cornerstone investors have already taken up $5.45 billion of the H-share Hong Kong offering, leaving a relatively small portion for mutual funds and Hong Kong's retail investors.
Investor interest and their views on valuation will be critical in determining if ABC's will be the world's largest-ever IPO, exceeding the $21.9 billion that Industrial & Commercial Bank of China raised in 2006.
It would be hard to discern from the oversubscription ratio how ABC's IPO will be priced, without knowing investors' average bidding price, Guoyuan Securities' Yu said.
ABC said on June 28 it would sell shares in Shanghai at 2.52-2.68 yuan (37 to 39 cents) a piece, setting a much lower ceiling than the HK$2.88 - HK$3.48 (37 to 45 cents) range given for its Hong Kong offering, reflecting weaker demand among mainland investors.
ABC's Shanghai IPO has weighed on the mainland markets, prompting some investors to sell shares in rival banks in the hope of using that cash to participate in the ABC IPO, contributing to a slide in the benchmark Shanghai Composite Index this week.
ABC will price the Hong Kong portion of its IPO on or around July 6 and the Shanghai leg on July 7. It plans to list on July 15 in Shanghai under the trading symbol "601288" and the next day in Hong Kong under the trading symbol "1288".