Money

ABC's shrinking discount makes IPO harder sell

(Agencies)
Updated: 2010-07-05 11:01
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Rivals' fundraising

Xiang is taking his bank public after almost 50 companies worldwide shelved IPOs in the past three months amid concern that the end of government stimulus and widening budget gaps from Greece to Spain will curb the global economic recovery, data compiled by Bloomberg show.

The Hang Seng China Enterprises Index, which includes shares of ICBC, Construction Bank and Bank of China, has fallen for eight straight days, the longest losing streak in a decade.

Domestic rivals are also competing for investors' cash. Bank of China, the nation's third-largest by market value, said July 2 it plans to raise as much as 60 billion yuan ($8.9 billion) in a rights offer to replenish capital.

Construction Bank last month won shareholder approval to raise as much as 75 billion yuan in a rights offer.

"With Bank of China's share placement and then CCB's, ABC should be willing to leave some profit on the table," said Claude Tiramani, who manages $50 million at Lutetia Capital in Paris. "So I wouldn't be expecting the shares to be priced at the top end of the range."

Shanghai comparisons

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Agricultural Bank is selling 22.2 billion shares in Shanghai at 2.52 yuan to 2.68 yuan each, implying a price-to- book ratio of 1.56 to 1.65 times for that tranche, according to Hong Yuan Securities Co.

At the top end, the valuation matches the average for ICBC's, Construction Bank's and Bank of China's Shanghai shares. It was at least 4.1 percent cheaper when the range was set.

"Agricultural Bank will probably be able to price its A share offering at top end of the range, but I doubt they can do the same with the H shares," said Jenny Cai, a portfolio manager at Beijing-based Springs Capital, which oversees $300 million.