Shares in Bank of China (BOC), the mainland's second-largest lender, are expected to soar over the next three months after the first day of trading on June 1, according to analysts.

 

BOC raised US$9.73 billion after pricing its IPO at HK$2.95 (37.8 US cents) per share yesterday, the world's largest IPO in six years and the largest share sale ever launched by a mainland company.

 

It surpasses its home rival China Construction Bank, which raised US$9.2 billion in its Hong Kong IPO last October.

 

Analysts predicted the shares will grow by five to six percent within three months after it begins trading on June 1, and they might climb a further two to three percent afterwards.

 

"The shares (in Bank of China) are a good buy for long-term investment," Tang Sing-hing, associated director from Tung Tai Securities, told China Daily.

 

Tang believes BOC's listing reflects the increasing strength of mainland financial institutions.

 

Founded in 1912, the mainland's oldest lender sold nearly 25.57 billion shares at HK$2.95 each, close to the top of its indicated range of HK$2.5 (32 US cents) to HK$3 (38 US cents) per share, driven by strong investor demand.

 

The IPO's retail portion was 75 times oversubscribed and the institutional tranche was at least 20 times covered.

 

Addressing concerns about the impact of a stronger yuan, Tang said it would not dampen BOC's performance.

 

He said the asset value of the mainland's biggest foreign exchange bank will shrink somewhat as its large foreign currency savings will be weakened against the strengthening yuan.

 

"All investors could foresee that. But it will not shake both institutional and retail investors' confidence in the mainland's top banks."

 

Hong Kongers have shown unprecedented enthusiasm for BOC's share sale in the past week, with a total HK$287 billion (US$36.8 billion) in subscriptions flowing in since the order books were opened last Thursday. This deal is the most popular in Hong Kong in terms of money locked in.

 

Long queues at application-form distribution centers were seen across Hong Kong until noon on Tuesday, the IPO deadline.

 

"I thought the closing day would be less crowded, so I decided to hand in my order before lunch. Surprisingly, I still had to wait in line," said 25-year-old Alex Cheuk, who bought 6,000 BOC shares.

 

BOC management said it will seek an A-share listing in the domestic market "as soon as possible".

 

Bank of Communications went public in Hong Kong last May and its shares double within a few months.

 

The mainland's biggest property lender China Construction Bank's record IPO last October was the largest in four years worldwide. Strong demand for the IPO boosted its share price by about 50 percent.

 

(China Daily May 25, 2006)