Agricultural Bank of China Ltd rose 2.2 percent on its debut in Hong Kong, after posting the smallest first-day gain among major rivals in Shanghai yesterday following a $19.2 billion initial stock sale.
China's largest bank by customers climbed to HK$3.27 (42 cents) at the 4 pm close from the IPO price of HK$3.20. The shares fell 0.4 percent to 2.69 yuan (40 cents) in Shanghai, giving Agricultural Bank a market capitalization of $128.6 billion. Hong Kong's benchmark Hang Seng Index fell 0.03 percent.
Unlike its four largest local rivals, who went public in Hong Kong in 2005 and 2006 in the midst of a five-year bull market, Agricultural Bank's debut came after a 7.5 percent drop in the city's benchmark stock index this year. Chairman Xiang Junbo also had to contend with investor concern that a slowdown in China's property market might saddle banks with bad loans.
"Investors are worried about local government finances, a property downturn, about the big credit expansion last year; all these will produce bad debts," Anthony Bolton, president of investment at Fidelity International, said in a Bloomberg TV interview today. "That's why valuations are where they are."
Analysts and fund managers surveyed by Bloomberg had predicted a first-day gain of 5 percent in Hong Kong, according to the average of seven estimates. The bank rose 0.8 percent in Shanghai yesterday, falling short of the average projection for a 6 percent increase.
Agricultural Bank's Xiang said today he's "very satisfied" with the share price in Hong Kong.
First-day volume in Hong Kong was 3.19 billion shares, or more than six times the number of shares traded in rival Bank of China Ltd.
Agricultural Bank's Hong Kong price represents 1.65 times end-2010 book value as estimated by the IPO underwriters. That compares with 2.15 times for ICBC, 2.06 times for China Construction Bank Corp, and 1.56 times for Bank of China.
The closing price in Shanghai yesterday valued Agricultural Bank shares at 1.59 times estimated book value, a 6 percent discount to the Hong Kong IPO price.
"For Agricultural Bank to be successfully listed and be at least able to keep above the IPO price in the middle of all this is already quite an achievement," Daniel Jim, managing director at Tripod Management Ltd, said in a Bloomberg TV interview before trading started today.
Agricultural Bank is the last major Chinese bank to go public, wrapping up a decade-long overhaul of the nation's banking industry that cost an estimated $650 billion. Bank of Communications Co, Construction Bank, Bank of China and ICBC sold shares between June 2005 and October 2006.
Construction Bank had the weakest Hong Kong debut of the four, closing unchanged on Oct 27, 2005, while the other three jumped at least 13 percent on their first day.