Agricultural Bank attracts $50bn in Hong Kong bids

Image via Wikipedia

By Robert Cookson in Hong Kong


Published: July 1 2010 18:18
Last updated: July 1 2010 18:18

Institutional investors have placed bids valued at $50bn for the Hong Kong portion of Agricultural Bank of China’s mammoth dual-listing, according to people close to the deal.

The high level of institutional demand means that Agricultural Bank remains on track to raise as much as $23bn in what could be the world’s biggest initial public offering.

EDITOR’S CHOICE

Agricultural Bank’s hopes on IPO hit - Jun-28Blog: Beyond Brics - Jun-28AgBank will need all of its powers of persuasion - Jun-24Financial frailties might slow China’s growth - Jun-25China's AgBank sets price range for listing - Jun-24BlueStar SecuTech plans surveillance push - Jun-24Investors have been placing their orders at prices across the HK$2.88-HK$3.48 range in which Agricultural Bank plans to sell 25.4bn shares in Hong Kong.

“The orders are mixed,” said a person close to the deal. “Some are at the bottom, some at the top.”

If the shares sell at the top of the price range and underwriters on the deal trigger options to increase the offering’s size by 15 per cent, Agricultural Bank could raise as much as $13bn in Hong Kong and another $10bn in Shanghai.

At $23bn, the listing would exceed the record $21.9bn that Industrial and Commercial Bank of China raised in 2006.

But the euphoria that surrounded previous IPOs of Chinese state-owned banks is absent this time.

Four years ago, overseas institutional investors ordered about $350bn of ICBC shares and retail investors queued in their hundreds to get involved in the deal.

Agricultural Bank had originally hoped to raise as much as $30bn in the IPO but has been forced to scale down its expectations in recent weeks as stock markets have weakened.

The Shanghai stock market has fallen 25 per cent since mid-April because of worries about the economy and concern that a deluge of bank fund-raisings will swamp the market.

Market volatility has not eased up since Agricultural Bank set its IPO price ranges for Shanghai on Monday and for Hong Kong a week ago on Wednesday.

In moves that bode ill for the final price of the offering, the Shanghai market has dropped 6 per cent since the announcement. Hong Kong has fallen 3 per cent.

Shares worth $5.45bn, or nearly half of the Hong Kong offering, have already been allocated to 11 main investors, most notably the sovereign wealth funds of Qatar and Kuwait.

Yesterday, Archer Daniels Midland, one of the world’s largest grain traders, said it was taking a cornerstone stake by investing $100m.

ADM, based in Decatur, Illinois, owns animal feed plants in China. Announcing the collaboration agreement with Agricultural Bank, Patricia Woertz, ADM chief executive, said: “China’s agricultural market is growing in both supply and demand and represents significant growth opportunities for ADM.”

The IPO’s final price will be set on July 6 with the shares due to list in Hong Kong on July 16, a day after Shanghai.

CICC, Goldman Sachs, Morgan Stanley, Deutsche Bank, JPMorgan and Macquarie are handling the Hong Kong offering, along with Agricultural Bank’s securities unit. In Shanghai, the underwriters are CICC, Citic Securities, Galaxy and Guotai Junan Securities.

Additional reporting by Gregory Meyer in New York

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web