Massive demand for Bank of Beijing IPO

SHANGHAI: Bank of Beijing, a medium-sized Chinese bank, drew more than US$250bil of funds to its US$2bil share sale in Shanghai, setting a record for subscriptions to an IPO in China's domestic market. 

The massive demand for the shares may ease concern about the stock market's ability to absorb a slew of big IPOs expected over the next several months, as monetary policy tightens and this year's bull run in equities shows signs of faltering. 

Bank of Beijing, in which Dutch bank ING Groep owns nearly 20%, said yesterday it had set the price for its sale of 1.2 billion A-shares, or about 19% of its enlarged capital, at 12.50 yuan each – the top of an indicative range. 

The bank drew a total of 1.9 trillion yuan (US$253bil) of subscriptions from retail and institutional investors, beating the previous record of 1.63 trillion yuan set by shipping giant COSCO Holdings in its Shanghai IPO in June. 

Pedestrians walk past a branch of the Bank of Beijing. — Bloomberg

Bank of Beijing allocated 900 million shares to retail investors and 300 million to institutions, raising the ratio in favour of the retail tranche because of strong demand. 

The pricing of the IPO valued the shares at 36.38 times 2006 earnings, roughly twice the valuation of bank stocks globally but well below the average of about 50 times for domestic Chinese banking stocks. 

That appeared to ensure a strong debut for Bank of Beijing shares, which are expected to list in Shanghai next Wednesday. – Reuters

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