The upcoming initial public offering (IPO) of shares in China's fifth largest lender in Hong Kong is stirring up interest both at home and abroad.

This comes despite other share offerings threatening to steal the Bank of Communications' (BOCOM) thunder.

Ben Kwok, director of KGI Securities, said the IPO for BOCOM should appeal to the market as HSBC's 20 percent holding in BOCOM gives investors a vote of confidence in the offering.

"BOCOM is the first state-owned bank to be listed in Hong Kong and I would not doubt the attractiveness of the bank to the market," said Kwok.

BOCOM began marketing its US$1.5 billion IPO on Wednesday by selling 5.9 billion shares, or 13 percent of its enlarged share capital, after winning listing approval from the Hong Kong stock exchange on Tuesday.

It plans to open its order book for IPO shares around June 7, and begin trading around June 23, according to Reuters.

"It's certain that stock will receive over-subscription from investors," said Kwok.

Song Feng, BOCOM's spokesman, declined to comment on the IPO.

Louis Wong, director of Philips Securities, said he believed that the market had already got over the poor 0.37 percent return on BOCOM assets in 2004. He believes investors are now more concerned about the growth potential of the Chinese banking industry as the scale of the mainland economy increases.

HSBC's return on assets (ROA) last year stood at 1.02 percent, while Hang Seng recorded 2.17 percent.

"As long as the corporate restructuring is complete, the mainland banks will become very attractive for investors and international financial institutions given the vast underdeveloped banking market on the Chinese mainland," Kwok said.

Earlier speculation had suggested that this giant IPO would get a poor response from investors given its thin ROA and upcoming IPOs from other state-owned companies.

"Investors want banking exposure, but they will be selective because there are more banks coming to market," Sam Ho, a senior official with KDB Asia Ltd in Hong Kong, was quoted by Bloomberg as saying on Tuesday.

For example, China Construction Bank, which plans to raise between HK$5 billion and HK$10 billion on the Hong Kong market, has set a timetable to launch its IPO by November.

"The IPO, if we can realize it this year, should be in November because December would be too late," Guo Shuqing, chairman of the bank, was quoted by Reuters as saying Wednesday.

The number of foreign companies interested in buying strategic stakes ahead of listing, according to Guo, has fallen to five or six from around 10 previously.

(China Daily May 26, 2005)