Hong Kong: Shares in China Merchants Bank (CMB), the mainland's sixth-largest lender, soared 25 per cent to HK$10.68 (US$1.38) during its Hong Kong trading debut on Friday as its US$2.4 billion initial public offering (IPO) attracted huge investor demand.

Analysts said CMB's better-than-expected listing would encourage its peers to follow suit, selling shares in Hong Kong to take advantage of investor confidence in the mainland's booming banking industry.

CMB emerged in the late 1980s as the mainland's first shareholding commercial bank and is seen as one of the most promising lenders in China. It is less burdened by non-performing loans and is more market-oriented than the top four lenders, an anonymous Hong Kong-based bank analyst told China Daily.

"CMB's smaller peers are most likely to follow suit selling shares in Hong Kong, especially those competitive shareholding banks and city commercial banks with foreign investors," he said.

The debut result of CMB's Hong Kong-traded shares beat analysts' expectations of a 15 per cent rise, according to eight Hong Kong analysts surveyed by China Daily on Thursday.

CMB is the fourth mainland bank listed in Hong Kong, but recorded the best result on its first trading day. In comparison, shares in Bank of China surged 15 per cent on the first marketing day. Bank of Communications, the first mainland bank listed in Hong Kong, rose 13 per cent. And China Construction Bank received a lukewarm market response to its debut.

"We are very satisfied with the trading performance so far. The successful listing of our bank on the Hong Kong stock exchange is a milestone for our bank's development. Our target is to make the group the most competitive and a world-class international bank," Qin Xiao, chairman of CMB, told reporters in Hong Kong on Friday.

"But one day's good performance doesn't mean much, we hope shares in CMB will have a favourable result in the long run and best reward our shareholders," Qin added.

CMB shares opened at HK$10.9 (US$1.4), 27.4 per cent higher than its issue price, and soared quickly to HK$11.14 seven minutes after the market opened, compared with their IPO price of HK$8.55, which was at the top of an indicative range.

The bank's IPO attracted share orders worth US$123.7 billion, a positive market response that might hearten the mainland's largest lender the Industrial and Commercial Bank of China, which plans to raise as much as US$21 billion next month in a dual listing in Hong Kong and Shanghai that would be the world's largest bank IPO.

UBS AG, one of the CMB deal's sponsors, said it was one of the most "smooth" projects they had handled.

"Thanks to CMB's good reputation on the mainland and favourable share trading performance on the A-share market, its share sale in Hong Kong has been very successful and it is one of the most smooth projects we have ever handled," said He Di, vice-chairman of UBS investment bank.

Another mainland lender, China CITIC Bank, aims to raise up to US$2 billion in a Hong Kong share sale by early 2007.

CMB's IPO values the lender at about 2.44 times its forecast book value. In comparison, No 5 mainland lender Bank of Communications trades at 2.66 times its 2006 book value, No 3 China Construction Bank trades at 2.41, and No 2 Bank of China is valued at 2.33 times its book value.

At the end of June, Shenzhen-based CMB had total assets of 824.3 billion yuan (US$104 billion) and 463 outlets, concentrated in wealthier urban areas.