ABC's IPO approval gives banks a boost

08:41, June 10, 2010      

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The banking sector stock index saw gains Wednesday in response to expectations that the securities regulator would approve the initial public offering of Agricultural Bank of China (ABC) on the same day.

All 14 listed banks in Shanghai and Shenzhen saw their stock prices grow Wednesday. The average growth of the banking sector stocks was 3.94 percent at the market close. China CITIC Bank led, with its shares soaring 9.98 percent, close to their daily trading limit.

The rebound of the banking sector is a reaction to the green-light given by the China Securities Regulatory Commission to the IPO application of ABC, said Xu Guangfu, a strategy analyst with Xiangcai Securities, a brokerage firm.

The China Securities Regulatory Commission (CSRC) said on its website Wednesday af-ternoon it had approved ABC's IPO application.

Banking stock prices had plunged and remained at a low level following the government's tightening measures in the property market in April and recent moves by listed banks to raise funds by issuing more shares.

Institutional investors such as social security funds, insurers, mutual funds and private equity investors, rather than individual investors, pushed the overall banking prices upward, Xu said.

The regulator's approval of ABC's IPO restored the market's confidence in banking stocks to some extent, as the previous downturn had made the sector's market prices attractive, he said.

Meanwhile, strategic investors hope that ABC lists as soon as possible. China's National Social Security Fund has invested 15 billion yuan ($2.2 billion) in ABC, Reuters reported May 31, citing Ji Guoqiang, an official with the fund.

ABC plans to launch its IPO on the A-share market July 15 and H-share market the next day,, a business portal, reported June 3, citing an unnamed source from ABC's underwriters.

The reason that ABC got the nod from regulators so quickly was to ensure its IPO could move forward in July, because the government might raise the interest rate for depositors in autumn to curb inflation, which will erode banks' profits and attractiveness to investors, said Yang Li, partner of strategy and financing with Adfaith Management Consulting.

ABC will issue no more than 25.57 billion A-shares and 25.41 billion H-shares, including additional shares to be issued by its underwriters if they choose to do so, according to ABC's prospectus filed with the CSRC June 4.

The share price has not yet been settled.

Source: Global Times


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