Thursday, October 27, 2005

Well, at long last, CCB shares are trading in HK, but its price is not enjoying the usual post-IPO euphoria. Preliminary results show that it rose only 1.1% higher than IPO price, which is luke-warm at best. At least it didn't drop. Well, the market has voted, and it's not looking great. The slight increase suggests that the underwriters, the strategic investors and major mainland banks are all doing their best to buy shares from small investors who are trying to cash in. It does not suggest that smaller investors want to hold CCB shares for long-term investment. If this continues, it will put a huge damper on the BOC IPO scheduled for next spring.

China bank makes HK stock debut
A member of staff at a branch of China Construction Bank in Hong Kong
Investors are keen to tap into China's economic potential
Trading in shares of China Construction Bank has started slightly higher than the Chinese lender's $8bn (£4.5bn) initial public offering (IPO).

The stocks debuted at the Hong Kong market at HK$2.375 ($0.306), a meagre 1.1% higher than the IPO price of HK$2.35 ($0.303).

On Wednesday, the bank's shares dropped 1% on the unofficial "grey" market.

China Construction's share listing is the world's biggest this year, and the largest ever by a Chinese company.

Overseas investors have been keen to tap into China's economic potential.

'Lacklustre sentiment'

Traders said earlier that concern about bird flu in the region had also dented sentiment on Hong Kong's Hang Seng stock market.

It'll be a pleasant surprise if China Construction Bank's shares can end higher than its IPO price on its debut
Francis Lun, general manager of Fulbright Securities

"Given the current lacklustre sentiment, it'll be a pleasant surprise if China Construction Bank's shares can end higher than its IPO price on its debut," said Francis Lun, general manager of Fulbright Securities.

As China's third biggest bank, China Construction holds assets worth $521m and has a 13% share of total deposits in the country.

Despite some worries over the exposure of Chinese banks to bad debt, accumulated after years of state-controlled lending, interest in China Construction's IPO has been strong.

Shares made available to smaller investors earlier this month were 42 times oversubscribed.

"China Construction Bank may lose one or two percent when it first opens, but as one of the biggest banks in China it will do well in the long term," said Alfred Chan, of Cheer Pearl Investment.

China Construction's IPO is expected to be followed next year by Bank of China, followed by Industrial and Commercial Bank of China in 2007.

It is a very good result for a firm that does an IPO if its shares stay at the IPO price on opening day. This means that the shares have not been mispriced and all the value of those shares has ended with the issuing company and not in the pockets of speculators who take advantage of poorly priced shares.

Hats off to whoever priced out this IPO. For once, the job was done right.
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