Agricultural Bank of China's record $22 billion IPO made a lacklustre debut in Shanghai, underscoring the challenges ahead for China's markets as other big banks look to tap investors for billions of dollars.
AgBank's listing completes its transformation from technical insolvency to a sprawling giant with assets of close to $1.4 trillion as of March and a customer base of 320 million, larger than the population of the United States.
However, it comes against the less-than-ideal backdrop of a stock market that has been the world's second-worst performer this year after Greece, questions over economic growth and rival banks returning to capital markets to supplement their coffers after a state-decreed lending spree last year.
"There's a lot profit-taking pressure from investors, who are not optimistic about the long-term prospects of China's economy or the banking sector," said Liu Jun, analyst at Changjiang Securities in Wuhan.
"The debut reflects worries over slower growth and rising bad loans at Chinese lenders, and continued weakness in the stock may prompt a renewed slump in the overall market."
AgBank shares were up 0.8 per cent to 2.70 yuan ($0.40) in afternoon trade, versus its IPO price of 2.68 yuan. The bank, which is aiming to raise a record $22 billion after exercising an overallotment option, took a low-key approach to its listing, not opening the debut ceremony to foreign media.
Chairman Xiang Junbo, a former soldier and scriptwriter, marked the occasion by giving a crystal model of AgBank's Beijing headquarters to the head of the Shanghai Stock Exchange, who gave Xiang a bronze opening gong in return, live television pictures showed.
Investors around the country watched the debut of the last of China's "Big Four" lenders to go public closely, looking for signs of whether the beleaguered stock market might find relief after shedding about a fourth of its value so far this year, in part because of jitters over the massive AgBank offering.
At one brokerage in downtown Shanghai, individual investors, many of them retirees, swapped theories on how much the government was controlling the stock market while watching with disappointment as AgBank's share price failed to take off.
"Apparently, investors think the AgBank IPO was overvalued, and the only reason it isn't falling is that it's a political task to keep it above the IPO price," said Qiu Zhicheng, an analyst at Guosen Securities Co in Shanghai. "This is not good for other banks' fundraisings going forward."
However, some retail investors looked to AgBank's modest day-one performance as a positive sign for the long run.
"A debut like this means the stock price will soon choose a direction, and I think it's more likely to rise," said Tony Shu, a lawyer who bought 20,000 shares, worth around $8,000, in the IPO. "I won't sell AgBank until it reaches 3 yuan, which I think is very possible," he said.
The lacklustre debut for China's third-largest bank by assets weighed on other banking stocks, despite encouraging economic data that showed inflation stayed in check in June. The main stock index .SSEC fell 0.3 percent in afternoon trade.
Reuters