Shanghai/Hong Kong: Agricultural Bank of China’s historic IPO is likely to lag the first-day jump in share price enjoyed by its rivals, as it aims to raise a record $22 billion in markets worried about growth and other equity sales.
A successful debut for China’s third-largest bank by assets would lend support to bank stocks, help stabilise a Shanghai market that has tumbled about 25% this year and bode well for upcoming fundraisings by peers including Industrial & Commercial Bank of China (ICBC) and Bank of China.
“AgBank’s IPO has such far-reaching implications for China in that a successful listing is seen as politically crucial, so a drop is unlikely,” said Fang Jiang, strategist at Founder Securities.
However, a limited supply of liquidity and generally weak demand for initial public offerings are likely to weigh on AgBank’s debut, making the initial jump that its predecessors enjoyed more difficult to achieve, analysts said.
AgBank’s debut may therefore buck the typical trend, rising less than 5% on the first day, compared with first-day pops of up to one-third for rival Chinese banks.
Drop seen unlikely
AgBank, the last of China’s “big four” state banks to go public, was founded by Mao Zedong in 1951 and now has some 441,000 employees in more than 23,000 branches. Its customer base of about 350 million is larger than the population of the United States.
A drop below AgBank’s IPO price of 2.68 yuan in Shanghai and HK$3.20 in Hong Kong is unlikely as some institutions are expected to help stabilise its price, analysts said.
“If AgBank’s listing is smooth and its shares steadily rise afterwards, that would benefit the whole market as well as other banking stocks,” Wu Songkai, Huatai United Securities analyst, said.