Bank Of China To Launch Hong Kong IPO

by Mary Swire, for LawAndTax-News.com, Hong Kong

11 January 2006

It has been reported that the Bank Of China is intending to launch an IPO in Hong Kong this spring, valuing the company at 400 billion yen (US$60bn) and raising about US$8bn in new capital.

BOC, the third or fourth biggest bank in China, was said in the state-run China Securities Journal to have received permission from the State Council and its controlling shareholder, government-owned Central Huijin Investment Company, which has injected about US$60bn into China's top four banks in order to clean up their balance sheets after decades of mis-directed lending. Bank of China became a limited company in August 2004.

Several foreign institutions have acquired shareholdings in BOC in the last year, including a 5% stake by Singaporean government investment company Temasek Holdings, and a 10% stake by a consortium of US banks. There has been opposition to the Hong Kong 'H'-share flotation from domestic interests who are opposed to what they see as 'selling off the family silver', and the State Council's agreement to the IPO is a signal that more internationalist factions have won the argument. Under the terms of its WTO accession, China is due to open up its heavily-restricted domestic banking sector next year.

"Preparations for listing application materials have been completed and the bank will submit its listing application to the Hong Kong Stock Exchange in early 2006," said the Securities Journal.

The Hong Kong operations of the Bank of China were regrouped into Bank of China (Hong Kong) in 2001, and a 2002 flotation was successful, with the 90% institutional tranche being over-subscribed 4.3 times, and the 10% retail tranche being over-subscribed 24 times. 35% of the issue was allocated to retail investors, and 65% to the institutions. The 385,000 applicants receiving shares made the bank the second most widely held public company in Hong Kong, after railway operator MTRC, which has more than 400,000 shareholders.

The China Construction Bank, another of the top four mainland banks, raised US$8bn last October, and BOC is expected to be followed by the Industrial & Commercial Bank of China in 2007.

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