Bank of China stocks jumped 29 percent as they began trading Wednesday on the
Shanghai Stock Exchange in the mainland's biggest initial public offering to
date.
Regulators say they expect the IPO, which raised nearly 20 billion yuan
(US$2.5 billion), along with future listings by other major corporations, to
help revive China's stock markets after years of sluggish trading.
Bank of China's shares began trading at 3.99 yuan (49 U.S. cents), up 29
percent from its IPO price of 3.08 yuan (38 U.S. cents). That was at the upper
end of analysts' estimates.
In May, the bank, China's second-biggest lender, raised US$11.2 billion with
a share offering in Hong Kong, the world's fourth-largest IPO ever.
Like other state-run commercial banks, it is seeking to replenish its capital
after massive write-offs of bad debts, and to boost its competitiveness ahead of
the full opening of China's banking industry to foreign competition later this
year.
Shanghai's benchmark Composite Index has gained 9 percent in the past three
weeks in anticipation of the bank's debut. It closed at 1,681.55 Tuesday, down
0.93 percent as investors sold to lock in profits, especially in bank
shares.
Analysts said they expected a strong debut for the lender's shares to propel
the Shanghai Composite Index past 1,700 on Wednesday.
"We expect Bank of China's A shares will have a gain of at least 15 percent
to 20 percent from its IPO price; that may boost the Shanghai Composite Index by
50-70 points," said Wu Ang, an analyst at CITIC Securities.
China recently resumed IPOs after a yearlong break for shareholding reforms.
The warm reception for those offerings suggests strong pent-up demand for new
shares, analysts say.
The first company allowed to conduct an IPO after the moratorium was
construction contractor CAMC Engineering Co., whose share price more than
quadrupled to 31.97 yuan (US$4) on June 19, its first day of trading. On
Tuesday, CAMC rose 1.82 percent to 17.95 yuan (US$2.24) on the Shenzhen Stock
Exchange.
Last week, Shenzhen Coship Electronics Co.'s shares more than doubled from
their IPO price and Yunnan Salt & Chemical Industry Co., the next in line,
saw its shares gain 75 percent on the first day of trading.
Bank of China reported last week that its net profit rose 31 percent in 2005
over the year before to 27.5 billion yuan (US$3.4 billion; euro2.7
billion).
(For more biz stories, please visit Industry Updates)
