Wednesday, April 26, 2006
BoC listing could provoke backlash
Bank of China, the country’s third-largest lender, will this week seek regulatory approval to raise up to US$8bn in Hong Kong, in a listing that could hand foreign investors led by Royal Bank of Scotland a paper profit of more than US$4bn.
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But news that the RBS consortium – which includes the tycoon Li Ka-shing’s charitable foundation, Merrill Lynch and hedge funds – stands to more than double the value of its investment in less than a year could deepen an anti-foreigner backlash in China.
People close to the situation said BoC, the second of the “Big Four” state lenders to list overseas, was set to present to the Hong Kong stock exchange its plans to raise between US$6bn and US$8bn through a listing of 10 per cent of its shares.
That compares with the US$3.1bn paid by the RBS consortium for a 10 per cent stake in August. The investment bank UBS and Temasek, Singapore’s state investment agency, have bought smaller stakes.
Although the overseas shareholders cannot sell their shares for three years, their notional capital gain could reinforce arguments that Beijing is selling state assets to foreigners cheaply.
Foreign investors argue that they deserve a discount to the IPO price as they take on extra risk by buying well ahead of a listing.
However, the deal with the RBS consortium, under which the UK bank took a 5 per cent stake in BoC for US$1.6bn, was criticised in China because the foreign investors won guarantees against a deterioration in BoC’s finances.
The lender’s decision to sell just 10 per cent of its capital – less than most other overseas-listed state companies – could increase the foreign investors’ paper profit further by boosting demand and sending the shares higher.
Analysts said the small free float for the IPO could make it difficult for foreign institutions to buy into the offering, scheduled for June.
The shares available for foreign fund managers could be further curbed by a pledge to sell Temasek an extra US$500m of stock in the IPO, as well as plans to earmark another portion of the offering for Hong Kong tycoons and expected strong demand from retail investors.
Under Hong Kong stock exchange rules, the proportion of an IPO to be sold to retail investors can increase from a minimum of 10 per cent to up to 50 per cent depending on the level of demand.
People close to the situation said BoC had won approval from Chinese regulators to sell about 15 per cent of its capital. However, it had decided to restrict the size of the overseas listing because of demands from Chinese regulators to sell some shares on the domestic stock market at a later stage.
//
But news that the RBS consortium – which includes the tycoon Li Ka-shing’s charitable foundation, Merrill Lynch and hedge funds – stands to more than double the value of its investment in less than a year could deepen an anti-foreigner backlash in China.
People close to the situation said BoC, the second of the “Big Four” state lenders to list overseas, was set to present to the Hong Kong stock exchange its plans to raise between US$6bn and US$8bn through a listing of 10 per cent of its shares.
That compares with the US$3.1bn paid by the RBS consortium for a 10 per cent stake in August. The investment bank UBS and Temasek, Singapore’s state investment agency, have bought smaller stakes.
Although the overseas shareholders cannot sell their shares for three years, their notional capital gain could reinforce arguments that Beijing is selling state assets to foreigners cheaply.
Foreign investors argue that they deserve a discount to the IPO price as they take on extra risk by buying well ahead of a listing.
However, the deal with the RBS consortium, under which the UK bank took a 5 per cent stake in BoC for US$1.6bn, was criticised in China because the foreign investors won guarantees against a deterioration in BoC’s finances.
The lender’s decision to sell just 10 per cent of its capital – less than most other overseas-listed state companies – could increase the foreign investors’ paper profit further by boosting demand and sending the shares higher.
Analysts said the small free float for the IPO could make it difficult for foreign institutions to buy into the offering, scheduled for June.
The shares available for foreign fund managers could be further curbed by a pledge to sell Temasek an extra US$500m of stock in the IPO, as well as plans to earmark another portion of the offering for Hong Kong tycoons and expected strong demand from retail investors.
Under Hong Kong stock exchange rules, the proportion of an IPO to be sold to retail investors can increase from a minimum of 10 per cent to up to 50 per cent depending on the level of demand.
People close to the situation said BoC had won approval from Chinese regulators to sell about 15 per cent of its capital. However, it had decided to restrict the size of the overseas listing because of demands from Chinese regulators to sell some shares on the domestic stock market at a later stage.
