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The Bank of Communications (BoCom), China's fifth-largest commercial lender after the Big Four, will be the first to test the Chinese bank IPOs (initial public offerings) late this month.
Analysts expect a warm hug from investors despite the lukewarm market sentiment.
After BoCom, the other two banks, the China Construction Bank and the Minsheng Banking Corp, are scheduled to go public later this year.
BoCom plans to issue 5.856 billion H shares for a price range of HK$1.95-2.55 (25 US cents -33 US cents) to raise HK$14.9 billion (US$1.91 billion), which is expected to begin trading on June 23, Bloomberg yesterday quoted an IPO document of the Shanghai-based bank as saying.
However, Song Feng, a senior official and former spokesman for the bank, declined to comment, neither did the bank's public relations firm, Citigate Dewe Rogerson.
According to the quoted document, the price range is 1.3-1.6 times the bank's estimated 2005 book value and 11.1-14.5 times its 2005 profit forecast.
"I think the price range is at the lower end of market expectations," Donny Wang, managing director of equity capital markets at Guotai Junan Securities, said yesterday, claiming that industry watchers expect the offering price range to be set between HK$2.05 (27 US cents) and HK$2.8 (36 US cents).
He said the recent poor investment sentiment and several huge initial public offerings on board prompted this low-end offering price.
"Actually the investment atmosphere is still a bit lukewarm in the market," Wang said. "It would be a bit difficult to absorb all the big listing activities at the same time."
The Hang Seng index inched up 0.3 percent to end at 13,860.55 points yesterday.
But Wang believed the lower price range would not affect the subscription spree of BoCom, as it is the first overseas-listed Chinese bank. "The offering price is not expensive, I think the market response would be quite positive."
He projected the share price will be set between HK$2 (26 US cents) and HK$2.1 (27 US cents). "The low-end price range can provide more room for upward share price movement," Wang explained.
KGI Asia Associate Director Ben Kwong projected the offering price will be set at the mid range of HK$2.2 (28 US cents) to HK$2.3 (29 US cents).
BoCom is expected to fix the price on June 18, according to the quoted document.
Wang's view was echoed by Michael Chen, a CLSA bank analyst. He said a cheaper price (than the average Hong Kong-traded bank shares) will increase the attractiveness of the offering, despite the fact that Chinese banks, with a high ratio of bad loans, are regarded a risky bet.
As a result of the bank's increasing efforts to get rid of bad assets, BoCom's ratio of non-performing loans reduced to 2.91 percent at the end of last year, much lower than the average 15.6 percent of the four State-owned banks.
(China Daily June 7, 2005)
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