Dull IPO

Lender’s pres­i­dent says it may soon be in Hang Seng China En­ter­prises In­dex

China Daily (USA) - - FRONT PAGE - By LUOWEITENG in Hong Kong sophia@chi­nadai­lyhk.com

State-owned Postal Sav­ings Bank of China made a lack­lus­ter stock mar­ket de­but in Hong Kong, de­spite be­ing the largest IPO in two years.

State-owned Postal Sav­ings Bank of China made a lack­lus­ter stock mar­ket de­but on Wednes­day in Hong Kong, de­spite notch­ing up the world’s largest ini­tial pub­lic of­fer­ing in two years.

Shares of the Bei­jing-based lender fluc­tu­ated in a tight range of HK$4.76 (61 cents)-HK$4.77, af­ter open­ing flat with its ini­tial of­fer price at HK$4.76 apiece. It ended its first trad­ing day at HK$4.77.

The bank raised $7.4 bil­lion in Hong Kong, a mega deal which was the big­gest IPO glob­ally since main­land in­ter­net be­he­moth Alibaba Group’s $25-bil­lion of­fer­ing in 2014.

Postal Sav­ings Bank Chair­man Li Guo­hua said at the list­ing cer­e­mony in Hong Kong on Wednes­day that the bank will plough 10 per­cent of its fu­ture net prof­its into div­i­dends.

He said he be­lieved the bank’s sheer size would mean that it will be in­cluded in the Hang Seng China En­ter­prises In­dex very soon, when main­land in­vestors could buy and sell its shares through south­bound trad­ing on the cross­bor­der stock con­nects.

The tepid stock per­for­mance in the very first trad­ing­day­may re­flect lin­ger­ing mar­ket con­cern over its above-av­er­age val­u­a­tions, noted Xu Xuem­ing, the bank’s vice-pres­i­dent.

Even al­though the mega­bank priced its IPO near the bot­to­mof amar­ket­ing range of HK$4.68 to HK$5.18 per share, its price-book ra­tio of 1.2 makes the stock over­val­ued com­pared with main­land lenders typ­i­cally priced at around 0.8 times their book value.

For the first three months of the year, the lender’s non­per­form­ing loan ra­tio re­mained low at 0.81 per­cent, dwarf­ing the av­er­age 1.73 per­cent for the main­land’s four ma­jor Sta­te­owned com­mer­cial banks.

Pre­vi­ously com­pletely State-owned, Postal Sav­ings Bank of China raised 45.1 bil­lion yuan ($6.8 bil­lion) by sell­ing a 16.92 per­cent stake to 10 high-pro­file strate­gic in­vestors at a cheaper val­u­a­tion of $40.6 bil­lion.

“Such a buy­ing spree among in­sti­tu­tional in­vestorscomesin a sign that the stock is viewed as a worth­while in­vest­ment,” said an­a­lysts from Bank of East Asia’s se­cu­ri­ties branch.

Fol­low­ing the trail blazed by China Zhe­shang Bank’s $1.9 bil­lion float and Bank of Tian­jin’s $989 mil­lion of­fer­ing in March, the main­land’s fi­nan­cial ser­vices sec­tor con­tin­ues to be the cat­a­lyst for the Hong Kong IPO mar­ket.

But this also raised the much-dis­cussed is­sue of di­ver­si­fy­ing new Hong Kong.

“A diver­si­fied IPO mar­ket is some­thing that the gov­ern­ment has no con­trol over. It should be de­ci­sion for the mar­ket,” saidHongKong Fi­nan­cial Ser­vices and Trea­sury Sec­re­tary Chan Ka-ke­ung.

“The SAR gov­ern­ment will dis­cuss with Hong Kong Ex­changes and Clear­ing Ltd on how to at­tract new types of com­pa­nies to float in HK.” share list­ings in


Postal Sav­ings Bank of China Chair­man Li Guo­hua (left) and Ex­ec­u­tive Di­rec­tor and Pres­i­dent Lyu Ji­a­jin pose with a gong dur­ing the list­ing of the bank at the Hong Kong Stock Ex­change on Wednes­day.

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