Shares in China Construction Bank (CCB) will start being traded in
Hong Kong on Oct. 27 following the bank's global launch of this year's biggest initial public offering (IPO), according to a leading financial newspaper. The IPO may reach 7.7 billion US dollars, the newspaper reports.
CCB has been declining to comment, but media reports about its overseas market listing abound.
Monday's edition of China Securities Journal, run by Xinhua News Agency, covers the bank's listing details, saying the shares will be priced in a range of 1.80-2.25
Hong Kong dollars (23-29 UScents) and that the CCB share trading number on the
Hong Kong stock exchange is 0939.
The CCB IPO -- expected to raise 6.1-7.7 billion US dollars -- is also the biggest-ever of any Chinese enterprise, eclipsing another mainland bank, Bank of Communications, which offered shares at 1.6 times book value in its 1.9 billion US dollar IPO last June.
The paper reported that CCB board chairman Guo Shuqing was busylaunching his bank's roadshow for institutional investors in leading US and European financial hubs ahead of the bank's retail share sale.
Citing sources familiar with the CCB move, the paper said that shares for institutional investors, accounting for 95 percent of the bank's planned total, have been fully booked. "Considering thehot market response, the CCB may price its shares at the upper end of the range."
Bookrunners for the deal include Credit Suisse First Boston Corp., China International Capital Corp. and Morgan Stanley.
Speaking on the sidelines of a meeting called by CCB to launch the marketing roadshow, Colin Lam, vice chairman of
Hong Kong property developer Henderson Land, said that chairman Lee Shau-Keeplans to buy 200 million US dollars worth of CCB shares.
Cheng Yu-tung, chairman of local property giant New World Development, also signaled his intention to invest about 200 million US dollars in the bank. He said the decision was made after ascertaining that CCB's thorny bad debt problem can hopefully be solved.
Bank of America, a "strategic CCB investor," has already pouredan investment of 2.5 billion dollars into the bank and said it would invest another 500 million dollars to maintain its 9 percentstake in CCB when it is listed.
The total investment of Temasek Holdings Ptd Ltd., the investment arm of the Singaporean government, would reach 2.47 billion dollars for a 5.1 percent stake, according to Securities Journal.
Foreign banks are making strategic investments in order to gaina foothold in the fast-growing and increasingly competitive Chinese banking market.
In China, authorities have been encouraging Chinese banks to seek foreign partnerships in order to build up their capital and improve management before China fully opens its banking industry to foreign competition in late 2006.
Current limits cap equity stakes in a Chinese bank by any one foreign institution at 20 percent, with total foreign holdings limited to a maximum of 25 percent. Those limits are apparently aimed at preserving state control of major lenders, industrial observers say.
Just before the CCB roadshow, the China Banking Regulatory Commission called a meeting on corporate governance of big banks. The CCB is China's biggest property lender.
"When big banks go public, it should be a key goal for them to maximize their market value," said Liu Mingkang, the country's top banking regulator.
"In their management, (the banks) should thoroughly understand how to balance credit risks, market risks and yields."
China's banks have long struggled with severe debt problems, a major hangover from the country's central planning days when easy credit was granted without concern about repayment of the loans.
CCB would be the first of China's big four state-owned banks --which includes Bank of China, the Agricultural Bank of China and the Industrial and Commercial Bank of China -- to list shares overseas.
In December 2003, the CCB and Bank of China received 22.5 billion dollars each from the central government to tidy up their balance sheets.
Regulators hope that pushing state banks to go public will bring greater transparency to the sector.
In 2004, CCB's pre-tax profits reached 50.22 billion yuan (6.19billion dollars). Its capital adequacy ratio, being a measure of its available capital in proportion to its outstanding loans, reached 11.29 percent -- significantly above the international 8 percent requirement.
