Institutional appetite for lender's IPO

09:23, July 16, 2010      

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Agricultural Bank of China last of big four to go public

Though they have a range of reasons to subscribe to the Agricultural Bank of China's initial public offering (IPO), institutional investors are showing strong interest.

Institutional investors and major cornerstone investors, including insurers, fund management companies, brokers, banks and sovereign wealth funds have subscribed to about half of the Shanghai and Hong Kong share offerings.

Insurance companies and fund management companies have taken up 70 percent of the off-line A-share offering allotment.

Investors participating the strategic allocation altogether spent around 30 billion yuan on the initial offering, while insurers have taken up 10 billion yuan of the Shanghai IPO.

Eleven companies, mostly foreign institutional investors, have taken up $5.45 billion of the Hong Kong portion of the offering.

"Foreign investors risk losing the chance if they don't move. Everybody is looking at the growth story in China. They want a piece of the pie," an analyst with Haitong Securities said.

The current weak stock market and low bank valuations have not diminished institutional investor interest.

"For domestic institutional investors, it's almost the same story," said a fund manager with a fund in Beijing, where Agricultural Bank of China (ABC) is based. He declined to be named as his fund management company is involved in the deal.

"ABC will be included in the Shenzhen-Shanghai 300 index, and its a requirement from the country's regulator for index-related funds to buy into ABC," he said.

Big insurance firms and securities houses have a situation similar to ours," the fund manager said.

The bank has more than 24,000 branches, 441,000 employees and 320 million customers.

"Insurance policies and insurance funds are sold by ABC and brokers win more clients with the help of the bank," he said.

Giant conglomerate China Life Insurance Co invested 4 billion yuan in the bank. It may be one of the largest buyers of ABC's A shares.

"China Life Insurance Co has tried for many years to buy into major banks as a strategic investor, but it never succeeded. This time, it spared no effort to take up ABC's Shanghai portion of shares as it aims to take advantage of the bank's extensive domestic network to develop its insurance business," he said.

Yet it appears retail investment appetite for the ABC offering was not that strong.

Stung by the recent wild market swings, retail investors seem to be no longer in the mood for taking any undue risks.

But all is not gloom. There are a considerable number of retail investors who plan to invest in the ABC issue for long-term returns as they are confident about the bank's future development.

"I plan to subscribe to 100,000 yuan worth of shares and consider it a long-term investment," said Li Wanting, a 45-year-old day trader and prospective investor.

"ABC is not a risky investment. Many investors want to make quick money from the stock market," he said. "They are not willing to wait for three or five years for the company to grow," he said.

Source:China Daily


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