Huge interest expected in Bank of China IPO

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Huge interest expected in Bank of China IPO
HONG KONG - The Bank of China (BOC), which is expected to launch later this year the world's largest initial public offering (IPO) for the last six years, will attract many individual investors with the opening of its retail tranche, analysts said.
This signals overseas investors' increasing confidence in the mainland's banking sector. "
[color=]Hong Kong
residents now favor mainland banks," said Andes Cheng, an analyst with South China Research Ltd.
"[The] BOC (Hong Kong), [the] Bank of Communications (BoCom) and China Construction Bank (CCB) all generated a lot of buzz when they floated their shares. [The] BOC will not be an exception," said Cheng. He said he would personally buy some shares.
Hordes of locals are expected to rush to securities houses and banks to subscribe to BOC shares, investing an estimated amount of more than HK$200 billion (US$25 billion) over four days, said Kingston Lin, Prudential Brokerage's associate director.
Four years ago, local investors liked to talk about the huge amount of non-performing loans in mainland banks. But now they are willing to invest in these lenders for higher profits. This is because the banks have improved a lot since the introduction of overseas strategic investors, shareholding reforms and listing efforts, Cheng said.
Citing BOC's cheap prices and high dividend payout ratio, some analysts said the largest-ever IPO launched by a mainland firm will attract more subscriptions than that of CCB's last year. CCB's US$9.2-billion deal was oversubscribed by 42 times last year, while BoCom's was oversubscribed by 204 times.
BOC is selling 25.57 billion H shares, or 10.5% of its enlarged share capital, for between HK$2.50 (30 US cents) and HK$3.00 (37.5 US cents) per share. The price values the lender at 1.9 times to 2.2 times its book value, which is at least 15% cheaper than rivals CCB and BoCom.
"It's pretty attractive," said Louis Wong, a director at Philip Asset Management. Even the recent setback of Hong Kong's stock market will not dampen investors' buying enthusiasm, Wong said. "Mainland banking stocks are relatively insulated from the recent market lull," he added.
Hong Kong's benchmark Hang Seng index experienced the biggest one-day decline in nearly two years on May 15, dropping 2.41% to 16,494.84. It continued to sink by 0.62% the following day.
Indeed, the lure of BOC's IPO has been on show even before the opening of its public offering; some analysts say the anticipation of the BOC IPO has led to a lukewarm response to other IPOs.
(Asia Pulse/XIC)