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AgBank shares mixed after confirming IPO world record

by Staff Writers
Shanghai (AFP) Aug 16, 2010
Shares in Agricultural Bank of China were mixed Monday after it confirmed it fully exercised its overallotment option in Shanghai to officially become the world's biggest initial public offering.

Shanghai-listed shares closed up 0.74 percent at 2.71 yuan (40 US cents), slightly higher than its IPO price of 2.68 yuan. It hit a high of 2.88 yuan on July 29.

But in Hong Kong, its shares ended 0.88 percent lower at 3.36 Hong Kong dollars (43 US cents). The Hong Kong initial offering price was 3.20 Hong Kong dollars. Shares peaked in the city on July 28 at 3.58 Hong Kong dollars.

AgBank -- the last of China's Big Four state banks to list -- originally raised a total of 19.23 billion US dollars from its shares before it started to trade in Shanghai and Hong Kong in mid-July.

It then exercised its overallotment option in both markets, which allowed underwriters to oversell up to 15 percent more shares than originally planned before AgBank listed.

The lender raised an additional 1.56 billion US dollars by selling 3.81 billion extra shares at 3.20 Hong Kong dollars each.

AgBank then raised another 8.94 billion yuan (1.32 billion dollars) by selling an extra 3.34 billion A-shares at 2.68 yuan each, according to a statement filed with the Shanghai Stock Exchange late Sunday.

That brought the total proceeds from the IPO to 22.1 billion dollars, exceeding the previous record set by the Industrial and Commercial Bank of China, which raised 21.9 billion dollars in its 2006 IPO.

Analysts said AgBank, which had dozens of state-owned enterprises as key investors in its IPO, was not as well positioned as its peers in terms of sustainable profitability and growth potential.

"You have to say it is a very successful IPO amid pessimistic sentiment following sharp falls in the market," said Yan Li, a Beijing-based analyst at Southwest Securities.

"It is evidence of the government's power in the domestic stock market."

The benchmark Shanghai Composite Index lost around 25 percent in the first half of the year on concerns over monetary policy tightening and large fund-raising plans by banks.

Now without the overallotment mechanism, which is designed to support share prices after listing, the stock may face more pressure in coming sessions, Yan said.

"Basically it has been struggling to stay above the IPO price since its debut. With the end of the mechanism, even if it did not fall below IPO prices as some have predicted, you cannot expect a really strong performance either," Yan said.

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