Top Biz News

BOC shares soar 15% in HK debut

By Lillian Liu (China Daily)
Updated: 2006-06-02 08:36

Shares in China's second-largest lender, Bank of China (BOC), which raised US$9.7 billion in the world's largest initial public offering (IPO) in six years, grew a better-than-expected 15 per cent in its trading debut in Hong Kong yesterday, despite recent poor stock performance.

Bank of China shares finished the day at HK$3.4 (43 US cents) over the offering price of HK$2.95 (37.8 US cents), which exceeded analysts' predictions for a lukewarm debut. Nearly one million Hong Kong retail investors bought the high-priced shares.

Earlier, a 5 to 6 per cent rise was predicted for the first day of trading of BOC's shares.

Analysts said the firm's debut, in which HK$1.8 billion (US$230 million) was involved, was "better than expected," thanks to some of the mainland's largest State institutions buying the shares.

However, given the continuing nervousness of investors over the uncertain outlook for the US economy, interest rates and oil prices, the share price might slide down somewhat, according to analysts with the securities houses that underwrote BOC's IPO. 

Steve Cheng, associate director at Shenyin Wanguo Securities, predicted BOC's share price to settle within the HK$3.15 (40 US cents) to HK$3.3 (42 US cents) range in the next two weeks.

"It will probably take one or two months and more news on BOC's strategic alliances before its share price touches a new high," Cheng said.

Shares in the mainland's oldest lender rose 6.8 per cent ahead of its trading debut and were quoted at HK$3.15 (40 US cents) in pre-market trade, compared with its IPO price of HK$2.95 (37.8 US cents) each.

The sharp jump, a rarity for mega-IPOs, also surprised individual investors.

"I had planned to buy more shares today, anticipating the shares might remain flat on its first trading day. But now the share price has soared so high, I don't know whether I should purchase any further," said 27-year-old Joe Cheung, who applied for three lots in the IPO. (A lot is 1,000 shares.)

BOC's share sale was the mainland's biggest ever and the hottest IPO in Hong Kong, where residents are known for being investment-oriented.

The bank's Chairman Xiao Gang, speaking at the listing ceremony, said the strong response from investors reflects their confidence in the bank, adding that the recent market slump would not have a big impact on the shares.

"We have confidence in the shares and we welcome the global investors and we are sure we will be able to earn a good return for our shareholders," Xiao told reporters.

BOC, the 66 per cent owner of Hong Kong's second-largest lender, BOC Hong Kong, is expected to follow up its Hong Kong IPO with a domestic share offering worth roughly US$2.5 billion "as soon as possible."

"A listing timetable is yet to be confirmed, but we will launch the domestic share sale as soon as possible once we complete our H-share offering in Hong Kong," said Xiao, indicating that the lender is still waiting for approval from regulators.

He earlier said he expected the bank's tax rate would fall after the bank went public, adding that the listing of the bank in Hong Kong opens another exciting chapter of the bank's hundred-year history. 

Hong Kong's benchmark Hang Seng Index fell about 8 per cent early this week, a slide that was expected to restrict early trading gains for BOC.

Founded in 1912, the mainland's biggest foreign exchange lender sold nearly 25.57 billion shares at HK$2.95 (37 US cents) per piece. Long lines were seen on Hong Kong footpaths after the bank offered local investors 1.28 billion shares in the IPO last month.

The bank's top management said the Hong Kong listing will help enhance its efficiency and transparency and improve its profit margin.

Beijing-based Bank of China is the mainland's most international lender, with branches in 25 countries and areas worldwide. Its Hong Kong unit, BOC Hong Kong, is among the three note issuers in the territory, joined by HSBC and Standard Charter.