August 16, 2010

China's Agricultural Bank completes world's largest IPO

The Agricultural Bank of China has raised a world record US$22.1 billion in its initial public offering (IPO) last month, despite a tepid reception from investors, after exercising an overallotment option for its Shanghai share sale.

The bank sold an additional 3.34 billion shares at the IPO price of RMB2.68 (US$0.39) per share as part of the overallotment, as expected, according to a notice.

The extra RMB8.94 billion (US$1.3 billion) raised pushed the dual Hong Kong-Shanghai IPO to US$22.1 billion in total, surpassing the previous record set by the Industrial & Commercial Bank of China's US$21.9 billion IPO in 2006.

Despite strong government backing for the IPO, the last by China's four biggest state-owned commercial banks, investors leery of the rural-oriented balance sheet and the market's overall outlook have shown lacklustre interest in the shares.

In Hong Kong, whose market is open to foreign investors, the bank's shares rose a mere 2.2% on their July 16 debut, compared with double-digit gains in past years for high-profile IPOs. In Shanghai, where yuan-denominated shares are sold only to domestic buyers, the shares rose just 1% on their debut.

By midday Monday, the lender's shares were up 0.7%, at RMB2.71 in Shanghai and down 1.5%, at 3.34 Hong Kong dollars a share, in Hong Kong.