Despite weak market conditions, Agricultural Bank of China is on track for the biggest ever initial public offering of shares.
With a dual listing in Hong Kong and Shanghai it is set to raise the equivalent of 17.5 billion euros.
AgBank – like all of China’s big banks – has to rebuild its capital. It is short of cash after lending massively to support Beijing’s economic stimulus.
Analysts said investor demand appeared to be robust. Todd Martin, is Asia equity strategist for global markets at Societe Generale: “It’s actually going to perform relatively OK. I see anywhere from five percent upside in the next, up to a month and I think where it was priced was in the top one-third of its range.”
The shares go on sale in mid July,but in both Hong Kong and Shanghai investor are wary, worried about possible defaults on loans and the state of the whole banking sector.
One investor in Shanghai said: “The bank stocks that I have bought are not rising in value, and now I am stuck with them. So why should I be buying into the Agriculture Bank of China IPO?”
Only three years ago, AgBank – which has a mainly rural customer base – was technically insolvent, with nearly a quarter of its loans in default.
It was turned around with a 24 billion euro government bailout.