China Construction Bank (CCB), China's second-largest bank by total assets, saw its share price climb 32.25 percent in its debut on the Shanghai Stock Exchange yesterday, far below analysts' earlier expectations.
CCB's shares closed at 8.53 yuan, up 2.08 yuan from the issue price of 6.45 yuan, while the benchmark Shanghai Composite Index dropped 1.08 percent to 5425.88.
The bank raised a total of 58 billion yuan in its initial public offering last week. The share offer attracted a record 2.26 trillion yuan subscription.
"I am relatively happy with the opening price of CCB," Guo Shuqing, CCB's chairman, said at a news briefing on the Shanghai Stock Exchange's trading floor yesterday morning. The shares opened at 8.55 yuan, a 32.5 percent premium on the issuing price.
CCB's H share plunged 5.42 percent yesterday to close at 7.09 yuan.
CCB, with total assets of 6.12 trillion yuan, is the third State-controlled commercial bank to list in Shanghai. Bank of China and the Industrial and Commercial Bank of China are the other two.
With 99 percent of income coming from the mainland, CCB is planning to expand the scope of its business and diversify to overseas markets.
CCB is waiting for government approval to establish an insurance joint venture with Ping An of China. "The approval is expected soon," Guo said.
The bank is prepared for the pilot scheme that will allow mainland residents to invest overseas, he said.
"We are also working closely with the Shanghai Futures Exchange (SHFE) on providing clearing services, and we have agreed to share our gold storage facilities with SHFE."
CCB is planning to issue two asset-backed securities, one based on quality assets and the other on non-performing loans. "The bank has plentiful liquidity. We have taken 1 trillion yuan in new deposits so far this year and have issued 300 billion yuan in new loans," Guo said.
The Beijing-based lender, 8.19 percent owned by Bank of America, said yesterday that the introduction of the foreign strategic partner has improved the bank's business process and triggered product innovation.
Wu Yonggang, an analyst with Guotai Junan Securities, said CCB's A-share performance yesterday was far below his expectations, which was above 9 yuan.
"This is probably because of liquidity pressure in the market, brought upon by the speeding up of IPOs, and investors do not want the money to be tied up during the National Day break," Wu said.
"CCB's weaker debut performance leaves room for it to rise further. The cheap CCB stock can also attract more long-term investors," said Gu Junlei, an analyst with Orient Securities.
(China Daily September 26, 2007)
