PREVIEW-AgBank’s giant IPO debut seen lacking fizz of rivals

* Debut hamstrung by weak markets, demand for IPOs

* Shanghai shares seen rising less than 5 percent on Thurs

* Hong Kong shares expected to rise 1-3 percent on Fri

* Successful debut seen as politically important for China

By Samuel Shen and Kennix Chim

SHANGHAI/HONG KONG, July 14 (BestGrowthStock) – Agricultural Bank
of China’s historic IPO is likely to lag the first-day jump in
share price enjoyed by its rivals, as it aims to raise a record
$22 billion in markets worried about growth and other equity
sales.

A successful debut for China’s third-largest bank by assets
would lend support to bank stocks, help stabilise a Shanghai
market (.SSEC: ) that has tumbled about 25 percent this year and
bode well for upcoming fundraisings by peers including
Industrial & Commercial Bank of China (ICBC)
(1398.HK: )(601398.SS: ) and Bank of China (3988.HK: )(601988.SS: ).

“AgBank’s IPO has such far-reaching implications for China
in that a successful listing is seen as politically crucial, so
a drop is unlikely,” said Fang Jiang, strategist at Founder
Securities.

However, a limited supply of liquidity and generally weak
demand for initial public offerings are likely to weigh on
AgBank’s debut, making the initial jump that its predecessors
enjoyed more difficult to achieve, analysts said.

AgBank’s debut may therefore buck the typical trend, rising
less than 5 percent on the first day, compared with first-day
pops of up to one-third for rival Chinese banks.

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StarMine comparative data http://r.reuters.com/jan46m

FACTBOX on China’s AgBank [ID:nTOE65308J]

Graphic comparing China banks:

http://link.reuters.com/vah95m

Graphic on top Asia top IPOs:

http://graphics.thomsonreuters.com/10/AS_IPOPRF0610.gif

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DROP SEEN UNLIKELY

AgBank, the last of China’s “big four” state banks to go
public, was founded by Mao Zedong in 1951 and now has some
441,000 employees in more than 23,000 branches. Its customer
base of about 350 million is larger than the population of the
United States.

A drop below AgBank’s IPO price of 2.68 yuan in Shanghai
and HK$3.20 in Hong Kong is unlikely as some institutions are
expected to help stabilise its price, analysts said.

“If AgBank’s listing is smooth and its shares steadily rise
afterwards, that would benefit the whole market as well as
other banking stocks,” Wu Songkai, Huatai United Securities
analyst, said.

AgBank, chaired by former soldier and scriptwriter Xiang
Junbo, begins trades on Thursday in Shanghai (601288.SS: ), and a
day later in Hong Kong (1288.HK: ).

Should the offering show strong demand in the first few
weeks, China’s third-largest lender will exercise an
over-allotment, boosting the $19.3 billion raised last week by
nearly $3 billion, making it the largest IPO ever.

MARKET WORRIES

AgBank is braving a stock market that is struggling to find
its feet amid investor concerns over monetary tightening, the
economy’s health and a flood of new share issues.

Investors are also casting doubts over Chinese banks’
growth prospects after last year’s lending spree weakened their
balance sheets and threatened asset quality.

AgBank, which was technically insolvent just three years
ago and had non-performing loans of around 24 percent, sold
22.2 billion yuan-denominated shares in Shanghai at the top of
an indicated range. The Hong Kong deal priced in the middle of
its original range.

The IPO price, which represents 1.6 times 2010 forecast
book value, is largely in line with rivals and leaves little
room for price gains in the secondary market, analysts said.

“If the stock rises too much, there will be tremendous
selling pressure,” said Zhou Lin, analyst at Huatai Securities,
who forecast AgBank will rise 3-4 percent to around 2.78 yuan
on Thursday.

ICBC shares rose 5 percent on its first day of trading in
Shanghai in October 2006, compared with 23 percent for Bank of
China also in 2006 and 32 percent for CCB in 2007. After
exercising its over-allotment, ICBC raised $21.9 billion, which
stands as the world largest IPO to date.

AgBank has said it would grow at a faster pace than its
major rivals, reporting on Tuesday a 40 percent jump in
first-half net profit.

Some investors seem unimpressed.

“I don’t expect AgBank’s shares to rise much, given the
current economic situation. I just want to make some pocket
money,” said David Pan, a 40-year-old businessman in Shanghai,
who plans to sell all his shares on its debut.

AgBank’s Shanghai IPO attracted much less than expected
from mainland investors, while the Hong Kong portion was only
five times oversubscribed by individual investors —
significantly less than rival banks.

AgBank has sold 40 percent of the Shanghai offering to 27
strategic investors including China Life Insurance (2628.HK: )
(601628.SS: ) and China State Construction (601668.SS: ). They are
subject to lock-up periods of 12-18 months.

Eleven cornerstone investors have been selected for its
Hong Kong share offering, including Qatar Investment Authority
and Kuwait Investment Authority, taking a combined $5.45
billion worth of shares.

“If the Hong Kong stock market stabilises at current levels
in the next few days, I expect AgBank can achieve 2-3 percent
upside,” said Ben Kwong, chief operating officer at KGI Asia.
($1=6.77 Yuan)
(Editing by Michael Flaherty and Lincoln Feast)

PREVIEW-AgBank’s giant IPO debut seen lacking fizz of rivals