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China's AgBank makes tepid Hong Kong IPO debut

China says chemical in McDonald's McNuggets within limits
Beijing (AFP) July 16, 2010 - China said Friday the amount of a chemical used in US fast food giant McDonald's Chicken McNuggets was within official limits, after reports said they contained risky additives. Media reports have said an anti-foaming agent and a petroleum-based chemical were used in the chicken pieces and that they could cause nausea, vomiting and even suffocation if taken in excessive amounts. The State Food and Drug Administration said in a statement it had tested samples of McNuggets and the cooking oil from 22 McDonald's restaurants in four provinces and municipalities including Beijing and Shanghai. The agency said it "did not find the content of tertiary butylhydroquinone in the McNuggets and its cooking oil exceeded the maximum amount" set by a national food additive standard.

As for the other chemical, dimethylpolysiloxane, authorities are working to come up with a set of testing measures due to a lack of a state standard, according to the statement, which was posted on the SFDA's website. Vivian Zhang, spokeswoman for McDonald's China, said last week that the food was safe and the additives were "common and fully-approved ingredients that are completely safe". China is regularly hit by product safety scandals despite government pledges to clean up the food industry. In 2008, the industrial chemical melamine was found in the products of 22 Chinese dairy companies in a massive scandal blamed for the deaths of at least six infants and for making 300,000 others sick in China. State media reported on Friday that 76 tonnes of melamine-tainted milk powder had been seized in northwestern China in the latest such case to emerge.
by Staff Writers
Hong Kong (AFP) July 16, 2010
Agricultural Bank of China's shares rose just slightly in the Hong Kong portion of its massive IPO Friday, with a positive start seen as a matter of pride for the world's third largest economy.

The lender's shares closed at 3.27 Hong Kong dollars (42 US cents), a 2.2 percent rise on their 3.20 Hong Kong dollar initial public offering price.

The last of China's "Big Four" state banks to go public could raise a record 22.1 billion US dollars in its mammoth dual offering, which opened in Shanghai on Thursday to a tepid investor response.

AgBank has not yet disclosed whether it will exercise an option to issue additional shares, a crucial factor in determining whether the sale would overtake rival Industrial and Commercial Bank of China's record-setting 21.9-billion-dollar IPO in 2006.

AgBank chairman Xiang Junbo told reporters in Hong Kong the flotation was a "historic moment" and "the first step of the internationalisation of AgBank".

He later added that he was happy with AgBank's share price in light of stock market weakness: "I am very satisfied. It's really not too bad -- 3.30 dollars", he said referring to the Hong Kong dollar share price.

Hong Kong's chief executive Donald Tsang and financial secretary John Tsang made a rare appearance at the lender's listing ceremony on Friday, underscoring the importance of AgBank's high-profile flotation.

Several heavyweight foreign investors had been drummed up to help make a success of the Hong Kong portion of the sale. Investors included Qatar's sovereign investment fund, British bank Standard Chartered and Hong Kong's richest tycoon, Li Ka-shing.

The biggest investor in the Shanghai issue was China Life, the nation's largest life insurer by premium income.

A total of 40 percent of the mainland shares went to 27 so-called cornerstone investors -- mostly state-owned entities ranging from Cofco Ltd, China's main grain producer, to China Aerospace Science and Industry Corp to the operators of the Three Gorges Dam.

Despite the strong support, AgBank had scaled back its original IPO target of nearly 30 billion US dollars amid choppy markets and questions about its balance sheet.

"The central government is going all out to make sure (AgBank's) IPO is a success," Francis Lun, general manager of Hong Kong's Fulbright Securities, told AFP earlier.

"They're determined to make a good show. Otherwise they would lose face."

AgBank had a lacklustre debut in Shanghai on Thursday with its shares closing at 2.70 yuan (40 US cents) -- up 0.75 percent from the IPO price of 2.68 yuan, but lower than the opening price of 2.74.

The Shanghai-listed shares closed 0.4 percent lower on Friday at 2.69 yuan (39 cents).

AgBank's debut rise in both cities was modest compared with previous Chinese bank IPOs, many of which rose 10 percent on their first day, according to Bernstein Research.

On Thursday, Beijing said that China's blistering economic growth had slowed in the second quarter.

"Investors may worry this will affect corporate earnings," Jonathan Siu, analyst at brokerage Core Pacific-Yamaichi in Hong Kong, told AFP.

"But many people would like to invest in (AgBank) because they are confident about the Chinese economy."

AgBank was founded two years after Mao Zedong's 1949 communist revolution with a mission to lend money to China's poor farmers and distribute state money in rural areas.

Heavy exposure to China's poverty-stricken interior meant that mission was frustrated by decades of chaotic policies, leaving it awash with bad debt.

Despite Beijing's efforts to salvage AgBank, it is the weakest of China's big banks and it remains to be seen whether it can shift from policy bank to a profit-driven company.

AgBank's stock market debut came after Fitch credit ratings agency warned of growing risks in China's banking system, with complex deals obscuring hundreds of billions in loans and possibly concealing a new batch of bad property and infrastructure lending.

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