Bank of China to price Shanghai IPO below HK
By George Chen
SHANGHAI, June 19 (Reuters) - Bank of China , the nation's second-biggest commercial lender, plans to price its $2.5 billion domestic listing at a 9-12 percent discount to its Hong Kong-listed shares, setting the scene for a strong debut.
The bank set a price range for what could be China's biggest domestic IPO of 3.05 to 3.15 yuan per share. It plans to list the shares in Shanghai by July 5, raising a maximum of 20 billion yuan ($2.5 billion).
The range compared with Bank of China's H-share price in Hong Kong of HK$3.375, or 3.48 yuan at current exchange rates. Analysts said the price range left room for the A-shares to rise after listing.
It's common for A-shares to surge on their trading debut. I expect BOC's A-share to trade at a premium to its H-share in the secondary market," said Clive Zhang, a fund manager at Partners Capital Asset Management in Hong Kong.
Zhang, who predicted Bank of China would price its domestic offer at the high end of the range, noted that the gap between shares listed in the two markets was narrowing due to improved capital and people flows.
Because of controls on capital flows between Hong Kong and mainland China, the bank's Hong Kong and Shanghai shares will not be directly exchangeable and may perform differently.
"Bank of China certainly has the potential to rise," agreed Charlene Chu, a director at Fitch Ratings in China.
ROOM TO RISE
Bank of China, the country's top foreign exchange lender, raised $11.2 billion in its Hong Kong IPO -- the world's fourth largest -- before listing there on June 1. One Hong Kong-listed share equals one Shanghai-listed share.
The bank said it had talked to 96 institutions including insurance companies, fund management firms, securities houses and trust investment firms to arrive at its price range. Eleven of those had suggested a price below 3.05 yuan, while 33 suggested a price above 3.15 yuan, the bank said.
Guotai Junan Securities, an underwriter for BOC's domestic share offering, expected the bank's shares would rise to 3.59 yuan soon after its Shanghai listing and likely remain at that level for the near term.
It could eventually trade as high as 4.15 yuan, said Wu Yonggang, a senior banking analyst at Guotai Junan.
At the top of its price range, Bank of China would be priced at 2.18 times 2006 book value -- compared with 2.59 times for Shanghai-listed Merchants Bank Co. and 1.83 times for Minsheng Banking Corp. , China's first private lender.
China recently lifted a year-long ban on domestic stock offers that had been intended to reduce pressure on the stock market during reforms.
The market is now booming, with the benchmark Shanghai stock exchange index up more than 35 percent this year. On Monday, shares in CAMC Engineering Co. Ltd. , China's first new listing in a year, more than quadrupled on their debut in Shenzhen.
Li Yamin, analyst at Shenyin & Wanguo Securities in Shanghai, said Bank of China's domestic IPO range was acceptable as she expected the bank could post 30 percent profit growth this year and 17 percent in 2007.
China's Guotai Junan, CITIC Securities and Galaxy Securities will underwrite Bank of China's domestic offer, while BOC International, a subsidiary of the bank and one of its Hong Kong IPO sponsors, will act as financial adviser.