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StanChart set to invest $500m in ABC float

By Li Xiang (China Daily)
Updated: 2010-07-01 09:28

People line up outside a bank to pick up the prospectus and documentation for the upcoming initial public offering of Agricultural Bank of China in Hong Kong on Wednesday. The bank is also planning to list shares in Shanghai. Jerome Favre / Bloomberg news

Lender's decision signals renewed interest in Chinese banking sector

BEIJING - Asia-focused lender Standard Chartered Bank Plc on Wednesday said it will invest $500 million as a cornerstone investor in Agricultural Bank of China's (ABC) initial public offering (IPO) in Hong Kong.

The lender's decision is expected to bolster the sagging investor sentiment at the Hong Kong and Shanghai bourses after the Hang Seng Index fell 0.6 percent on Wednesday, in tandem with the decline in Shanghai.

Standard Chartered's intention to invest in the ABC float is also a signal that foreign institutional investors are still bullish on prospects for the Chinese banking sector. Peter Sands, chief executive of Standard Chartered, described ABC as "a great bank with a great future" in a statement.

Earlier reports said the Qatar Investment Authority and the Kuwait Investment Authority have agreed to invest $2.8 billion and $800 million respectively as cornerstone investors in ABC's H-share sales.

It is estimated that cornerstone investors have bought up more than $5.5 billion of the H-shares, accounting for more than 40 percent of the share sale in the Hong Kong market.

ABC, the last of China's big four State-owned lenders to go public, started its share sale to retail investors in Hong Kong on Wednesday and will open the A-share sale to institutional investors on Thursday.

The lender is seeking to raise up to $23.2 billion through a sale of 56.3 billion shares including a 15 percent of over allotment of shares in both Hong Kong and Shanghai. If successful, the offering will become the largest global IPO and surpass the record of $21.9 billion set by Industrial & Commercial Bank of China (ICBC) in 2006.

Special Coverage: Focus on ABC's IPO Related readings:  Retail crowd shows muted interest in ABC IPO  ABC to launch $11.4 billion HK IPO  ABC IPO may raise $20b on Shanghai price  ABC to announce pricing of A shares today

Individual investors do not seem to be deterred by the headwinds in the weak stock market. A 58-year-old retail investor surnamed Kwok in Hong Kong was quoted by Reuters as saying that he considers the investment a long-term one and had subscribed to HK$300,000-worth of shares.

The lender has cut the price range for the Shanghai portion to 2.52 yuan to 2.68 yuan, compared to the price range of 2.51 yuan to 3.02 yuan for the Hong Kong offering.

Analysts said the potentially cheaper price for the Shanghai float might imply weaker demand in the A-share market.

"There's now a big question mark around ABC's mega offering as the sharp decline in the A-share market has clearly weakened investors' confidence," said She Minhua, a banking analyst at Haitong Securities in Shanghai.

But he said subscribing to the ABC issue may not prove to be as risky as perceived as the IPO has been priced at reasonable levels, given the bank's price-to-book valuation of 1.5 to 1.7 times which is cheaper than ICBC and China Construction Bank.