CHINA / National

BOC shares expected to fuel rally at Shanghai debut
Updated: 2006-07-05 09:12

Bank of China, China's second-largest lender, was set to begin trading Wednesday on the Shanghai Stock Exchange following a nearly 20 billion yuan (US$2.5 billion) initial public offering - the biggest ever for a mainland market.

Regulators have said they expect the bank's listing, along with future big IPOs by other major corporations, to help revive the bourses after years of sluggish trading.

Bank of China's shares were priced at 3.08 yuan (38 U.S. cents) for the IPO. Analysts said the shares were expected to begin trading in Shanghai at between 3.60 yuan-4 yuan (45 U.S. cents-50 U.S. cents).

In May, the bank raised US$11.2 billion with a share offering in Hong Kong, the world's fourth largest IPO ever.

Shanghai's benchmark Composite Index has gained 9 percent in the past three weeks in anticipation of the bank's debut. It closed at 1,681.55 Tuesday, down 0.93 percent as investors sold to lock in profits, especially in bank shares.

Analysts said they expected a strong debut for the lender's shares to propel the Shanghai Composite Index past 1,700 on Wednesday.

"We expect Bank of China's A shares will have a gain of at least 15 percent to 20 percent from its IPO price; that may boost the Shanghai Composite Index by 50-70 points," said Wu Ang, an analyst at CITIC Securities.

China recently resumed IPOs and other share offerings after a yearlong break for shareholding reforms. The warm reception for those offerings suggests strong pent-up demand for new shares, analysts say.

The first company allowed to conduct an IPO after the moratorium was construction contractor CAMC Engineering Co., whose share price more than quadrupled to 31.97 yuan (US$4) on June 19, its first day of trading. On Tuesday, CAMC rose 1.82 percent to 17.95 yuan (US$2.24) on the Shenzhen Stock Exchange.

Last week, Shenzhen Coship Electronics Co.'s shares more than doubled from their IPO price and Yunnan Salt & Chemical Industry Co., the next in line, saw its shares gain 75 percent on the first day of trading.

Bank of China reported last week that its net profit rose 31 percent in 2005 over the year before to 27.5 billion yuan (US$3.4 billion).

Like other state-run commercial banks, it is seeking to boost its competitiveness ahead of the full opening of China's banking industry to foreign competition later this year.


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