Roundup: BOC HK Sets IPO Offering Amid Extreme Market Volatility

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Last updated at: (Beijing Time) Thursday, July 25, 2002

Roundup: BOC HK Sets IPO Offering Amid Extreme Market Volatility

Bank of China Hong Kong (Holdings) Ltd Thursday set its initial public offering amid extreme market volatility, leaving its issue price of 8.50 HK dollars exposed to heavy pressure.

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Bank of China Hong Kong (Holdings) Ltd Thursday set its initial public offering amid extreme market volatility, leaving its issue price of 8.50 HK dollars exposed to heavy pressure.

Dealers said that somewhat disappointing debut of BOC Hong Kongon the mainboard is a key focus for investors at this point. BOC was trading at 8.30 HK dollars against its institutional offer price when the exchange ended its morning session.

Analysts believed that whatever the short-term price fluctuations, volatility and pressure should not detract from the significance of the listing of Hong Kong's second largest banking group.

"I am confident on the stock over the longer term," said Liu Mingkang, president of BOC and chairman of BOC Hong Kong. "We hopethat we can give investors a good return."

KGI Securities director Ben Kwong said BOC had come under some pressure early on as retail investors, who were given a 5 percent discount to the institutional offer. "I would expect the stock will be under some pressure in the near term but over the longer term, I think it will be okay," he said.

Kwong added that hopes that the stock will be added to the Morgan Stanley Capital International index and Hang Seng Index constituent indexes in the not too distant future are likely to support the share.

Success of BOC Hong Kong's listing, the largest local share offering and the third-largest in the world so far this year, is akey milestone for China's banking sector.

Although most of the funds were locally generated, American andEuropean investors lent modest support despite the severity of theslide under way in their domestic markets. Japanese investors werefar more supportive.

A total of 22.1 billion HK dollars (2.83 billion US dollars) the bank has raised will help accelerate the process of improving the capital structure by writing off bad loans that it ran up during a period of reckless lending.

Economists here noted that although some of the baggage remains,the management needs to be congratulated for making strenuous efforts to remedy the wrongs of the past in its efforts to create a modern, expansion-minded institution preparing to compete among the industry's world leaders.

They said that the stringent legal, regulatory and listing rules that BOC Hong Kong has been forced to comply with will also provide its parent, and the entire mainland banking sector, with amodel for reform. BOC's role as an agent for change will gather importance as China's banking sector continues to labor under debts and somewhat inefficiencies.

Market analysts said that support mechanisms are firmly in place to hold the price within a steady band on debut. However, nomatter at what level the price closes Thursday, Hong Kong will have passed another milestone in the history of its banking industry, and its capital-raising capability has received a significant boost at a timely moment.

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