BOC Retail Subscription Starts Today In Hong Kong

by Mary Swire, Tax-News.com, Hong Kong

16 July 2002

Today sees the start of the subscription period for retail investors in the Hong Kong IPO of Bank of China (Hong Kong) - institutional book-building began a week ago and the issue's sponsors profess themselves 'very happy' with the level of interest in the issue.

The window for retail subscriptions will close on Thursday. The bank has printed 3m application forms for the issue, the biggest ever to take place in Hong Kong. Initially 10% of the 2.3 billion shares on offer are being allocated to retail investors, but interest is expected to be strong and underwriters have provided for a 'claw-back' of up to 20% from the international part of the institutional issue.

Under HKEx rules, if a retail issue is over-subscribed more than 15 times, then more than 30% of the issue must be allocated to the retail segment. At a media briefing yesterday, Eric Wong, head of equity capital markets of BOCI Asia, one of the share sale's three joint global co-ordinators, said BOC Hong Kong planned to claw back more shares than the minimum required by HKEx:

"We have reached an understanding with the stock exchange [on this issue] . . . for instance, we might allocate 35 or 40 per cent to the retail tranche," Mr Wong said yesterday at a media briefing to drum up interest in the retail offer.

Hong Kong investors were surprised last week when the Bank of China announced a price range for the IPO which was well below the expected level.

Presumably with an eye to rocky equity markets and some less than flattering research issued lately querying its key banking ratios, BOC said it would raise up to HK$25 billion by offering 2.64 billion shares in a price range of HK$6.93 to HK$9.50, implying a multiple of between 12 times and 16 times earnings. The market had expected a price range of HK$7.70 to HK$11.80.

The final price for the issue will be fixed on July 25 after the subscription period has closed.

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