HONG KONG - The
Bank of China (BOC), which is expected to launch
later this year the world's largest initial public
offering (IPO) for the last six years, will
attract many individual investors with the opening
of its retail tranche, analysts said.
This
signals overseas investors' increasing confidence
in the mainland's banking sector. "Hong Kong residents now favor
mainland banks," said Andes
Cheng, an analyst with South China Research Ltd.
"[The] BOC (Hong Kong), [the] Bank of
Communications (BoCom) and China Construction Bank
(CCB) all generated a lot of buzz when they
floated their shares. [The] BOC will not be an
exception," said Cheng. He said he would
personally buy some shares.
Hordes of
locals are expected to rush to securities houses
and banks to subscribe to BOC shares, investing an
estimated amount of more than HK$200 billion
(US$25 billion) over four days, said Kingston Lin,
Prudential Brokerage's associate director.
Four years ago, local investors liked to
talk about the huge amount of non-performing loans
in mainland banks. But now they are willing to
invest in these lenders for higher profits. This
is because the banks have improved a lot since the
introduction of overseas strategic investors,
shareholding reforms and listing efforts, Cheng
said.
Citing BOC's cheap prices and high
dividend payout ratio, some analysts said the
largest-ever IPO launched by a mainland firm will
attract more subscriptions than that of CCB's last
year. CCB's US$9.2-billion deal was oversubscribed
by 42 times last year, while BoCom's was
oversubscribed by 204 times.
BOC is
selling 25.57 billion H shares, or 10.5% of its
enlarged share capital, for between HK$2.50 (30 US
cents) and HK$3.00 (37.5 US cents) per share. The
price values the lender at 1.9 times to 2.2 times
its book value, which is at least 15% cheaper than
rivals CCB and BoCom.
"It's pretty
attractive," said Louis Wong, a director at Philip
Asset Management. Even the recent setback of Hong
Kong's stock market will not dampen investors'
buying enthusiasm, Wong said. "Mainland banking
stocks are relatively insulated from the recent
market lull," he added.
Hong Kong's
benchmark Hang Seng index experienced the biggest
one-day decline in nearly two years on May 15,
dropping 2.41% to 16,494.84. It continued to sink
by 0.62% the following day.
Indeed, the
lure of BOC's IPO has been on show even before the
opening of its public offering; some analysts say
the anticipation of the BOC IPO has led to a
lukewarm response to other IPOs.
