Bank Of China Listing Will Test Share Price

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

25 July 2002

Bank of China Hong Kong (Holdings), whose IPO has just successfully raised US$2.5bn for parent Bank of China, lists today on the Hong Kong Exchange, and its 350,000 new shareholders may see their holdings dip sharply in price, although underwriters will probably try to stabilise the share price.

The shares were sold at HK$8.50, although retail investors were given a 5% discount, and analysts say the price may well dip below the $8 level when trading begins. The share price of international banks such as HSBC has been under pressure recently, and with major US banks trading at price-to-earnings ratios of only about 10 times, the 14 times ratio at which BoC was floated looks pricey.

But the bank's vice-chairman Liu Jinbao told the South China Morning Post that he was confident: "It will be a very exciting day. I have confidence in the trading for a couple of reasons," he said. "The roadshow we just completed showed that all the fund managers and investment banks reacted much better than I expected."

"After the merger of the 10 banks into BoC in Hong Kong and the restructuring which we undertook within the past two years, I'm confident that we have a tremendous opportunity to enhance the revenues of the bank. Investors also look at the improvement of our risk management and the improvement of our portfolio."

Mr Liu is also bullish on the Hong Kong property market, a key concern for the bank which is reliant on real estate for much of its loan collateral: "The property market in Hong Kong is quite flat," he says. "There is no sign that it will go further down. Hong Kong is a small island. It has gone down 60 to 65 per cent from its peak but I now think that it has bottomed out. However, the market will not go up sharply but it definitely will not go down."

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