Agricultural Bank of China's shares rose 2.2 percent in their debut on the Hong Kong stock exchange Friday, improving on their performance in Shanghai a day earlier, as the rural lender rolled out an initial public offering worth up to $22.1 billion.
But the limited gains paled in comparison to the double-digit increases posted by other major Chinese banks on their first trading days.
Priced at HK$3.20 ahead of the Hong Kong listing, the bank started trading at HK$3.25 and rose as high as HK$3.31 during the day before closing at HK$3.27.
On Thursday, Chinese investors were lukewarm toward the bank on its first day in Shanghai, with the stock closing 1 percent above its IPO price at 2.71 yuan. It fell 0.4 percent on Friday, closing at 2.69 yuan.
The Hong Kong IPO marked the international portion of the bank's dual-listing. Unlike the Shanghai bourse, the stock exchange in this semiautonomous southern Chinese territory is open to foreign investors.
The bank sold 25.4 billion shares in Hong Kong and 22.2 billion shares in Shanghai, raising $19.2 billion. The total could rise to $22.1 billion if underwriters exercise an overallotment option by Aug. 5 to purchase additional shares, according to the prospectus. If that happens, the listing would eclipse the global IPO record of $21.9 billion set in October 2006 by another Chinese state-owned lender, Industrial & Commercial Bank of China Ltd.
The last of China's "big four" state-owned commercial lenders to list, ABC is seen as weaker and less profitable than its peers, given that it operates a costly network of far-flung rural branches and its non-performing loan ratio is higher than other major banks at about 3 percent. Bank executives, however, tout its strong presence in the countryside as an untapped engine for growth.
Chinese stock prices have also been weighed down by concerns about an overflow of new shares, down 25 percent from the start of the year.
While Chinese banks are considered the world's strongest after avoiding the credit turmoil in the West, local authorities have warned about a possible spike in bad loans after last year's lending boom unleashed by a government stimulus plan. The ratings agency Fitch warned earlier this week that some Chinese banks may be downplaying the scale of their lending with complex deals.
Agricultural Bank Chairman Xiang Junbo said Friday he was happy with the market reaction given the current conditions. The bank had little choice in the timing of the listing because Chinese regulators ordered banks to replenish capital after last year's lending spree.
"I think our stock has always been very popular. It hasn't been unpopular. You should know better than I what state the global capital markets are in," Xiang told reporters in Hong Kong shortly after the listing ceremony on Friday.
"I'm very happy with the stock price today," he said.
The head of a Hong Kong securities house said prices in Hong Kong were propped up by institutional investors who bought more shares. Fulbright Securities Ltd. General Manager Francis Lun said the stock did fine considering the low expectations after the Shanghai debut, adding he expected greater interest in shares once the bank uses the proceeds from the IPO to improve its finances.
"It's a presentable result. It did not fall below its IPO price," Lun said.
An analyst at French investment bank Societe Generale said ABC's first-day performances in Hong Kong and Shanghai were disappointing, but added it was too early to pass judgment on the listings.
"Most people were looking for 5 percent (in gains)," said Todd Martin, the bank's Hong Kong-based Asia Equity Strategist. "The markets were looking for instant satisfaction, but people need to give it a week."
The bank has drawn strong backing from sovereign funds and other institutional investors still bullish about China's prospects despite recent weakness in its stock markets.
Major foreign investors in the Hong Kong offering include some of the territory's biggest tycoons and also Qatar Investment Authority ($2.8 billion), Kuwait Investment Authority ($800 million), Britain's Standard Chartered Bank ($500 million), Dutch bank Radobank Nederland ($250 million), Australia's Seven Group Holdings Ltd. ($250 million) and Singapore's Temasek Holdings ($200 million).
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