Bank of China (BOC) could become the first company to launch an
initial public offering (IPO) on the domestic bourse's main board
by issuing around 20 billion yuan (US$2.5 billion) of A shares in
June.
Wang Zhaowen, a spokesman for BOC, yesterday confirmed the bank
will issue A shares very soon. But he did not give a timetable.
However, domestic business newspapers yesterday reported that
the bank will likely be listed in June on the Shanghai Stock
Exchange.
"The bank will probably become the first IPO on the domestic
bourse's main board," China Business News said yesterday, quoting
an investment banker who participated in the bank's listing
issues.
The Shanghai-based Guotai Jun'an Securities, the Beijing-based
CITIC Securities and Galaxy Securities have been hired as
underwriters, a Guotai Jun'an staff member close to the deal told
China Daily.
Speculation about the timing of the share issuance is based on
fact, he indicated.
"As the Chinese saying goes, there are no waves without wind,"
he said, declining to be named.
"When to issue A shares depends on the performance of the A
share market," BOC Spokesman Wang responded, adding that the bank
will keep a close watch on the market and then decide when is the
right time to act.
"It also depends on the trading of BOC's H shares in Hong Kong,"
Wang said.
According to Wang, BOC has already got the go-ahead from the
relevant authorities including the China Securities Regulatory
Commission (CSRC) to issue A shares.
"In fact, issuing A shares on the domestic bourse is part of
BOC's whole listing plan and we have already got approval from the
CSRC. But there are still some details that need the CSRC's
approval."
Wang said the total volume of A shares and H shares together
will account for 15 percent of BOC's total equity.
The bank has already issued US$9.8 billion of H shares.
"The number of A shares will not be more than 10 billion,
capping approximately 20 billion yuan (US$2.5 billion)," Xiao Gang,
chairman of BOC said last week in Hong Kong. If so, A shares will
account for 3 percent of the bank's equity.
The government's recent lift of the year-long ban on IPOs in the
domestic bourse has encouraged many banks who need cash to issue A
shares to increase their capital-adequacy ratio, a key factor when
evaluating a bank's competence.
Last week, the Fujian-based Industrial Bank also announced it
would issue A shares very soon and probably be one of the first
banks to do so.
According to Li Renjie, president of the Industrial Bank, it
passed IPO application materials to the CSRC at the end of last
year.
Analysts pointed out that A-share issuance could turn out to be
a double-edged sword for bank shares in the domestic market.
"The issuance of H shares is likely to benefit BOC's A share
price as the H share price, which is higher, would be taken by
investors as a reference point," said Li Minya, an analyst with the
Shenyin Wanguo Securities.
"But the stock of some other listed banks may be marginalized as
institutional investors would first of all pick BOC for their bank
stock portfolio," Li said.
BOC's A shares will be available to mainland investors and
overseas buyers although the latter will only be permitted under a
qualified foreign institutional investor (QFII) scheme, the bank
said in its preliminary listing document.
(China Daily May 30, 2006)