China’s AgBank’s Bad Debt –Bids Begin

Bids valued at $50bn have already been placed by institutional investors for the Hong Kong portion of Agricultural Bank of China’s mammoth dual-listing, according to credible sources that are close to the deal. This attractive level of institutional demand is a major indication that the Agricultural Bank remains on track to raise as much as $23bn in what could be rated as the world’s biggest initial public offering for a bank.

The investors are placing their orders in the HK$2.88-HK$3.48 price range and it is anticipated that Agricultural Bank has plans to sell about 25.4bn shares in Hong Kong. A person who is closely associated to the deal states that the orders are mixed and there are some at the bottom and some at the top. It has been anticipated that If the shares sell at the top of the price range and underwriters looking into the deal begin with their options to increase the size of the offering by 15 per cent, the Agricultural Bank could raise as much as $13bn in Hong Kong and another $10bn in Shanghai. If the bank gets $23bn, this listing would exceed the records that the Industrial and Commercial Bank of China raised in 2006 at $21.9bn.

It has been witnessed that the euphoria that was experienced in the recent IPOs of Chinese state owned banks are absent this time. About four years ago the overseas institutional investors had ordered about $350bn of ICBC shares and the retail investors had reportedly queued in their hundreds to get themselves involved in the public offering deal. The bank had originally hoped to scale down its IPO expectations in the recent weeks due to the weakening of the stock markets. The Shanghai stock market has also fallen 25 per cent since the mid of April due to the worries that were generated about the economy and a major concern that a surge of bank fund raisings will ultimately flood the market.

Let us see how much the bank finally manages to get in the IPO offerings.