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Bank of China draws US$84b in IPO bids

Bank of China draws US$84b in IPO bids

Bank of China Ltd. attracted US$84.6 billion of bids for the nation's biggest domestic public offering, 33 times the stock on offer, underlining demand for share sales after the government lifted a yearlong ban.Individual investors accounted for more than 80 percent of the orders for stock in China's second-biggest bank, which sought 20 billion yuan (US$2.5 billion) selling local-currency shares, according to a statement by the Beijing-based lender.
Bank of China is a litmus test for efforts to channel more of the nation's US$1.9 trillion of household savings into equities after restrictions that forced Chinese companies to sell stock in Hong Kong and New York. The lender has a market value of HK$841 billion (US$108 billion), based on its Hong Kong-traded shares, potentially increasing the size of the mainland's two exchanges by 15 percent.
"China is not short of liquidity, but short of big, quality companies," said Li Haipeng, a fund manager of China Southern Fund Management Co., the nation's biggest fund manager. He predicted the stock will surge about 14 percent on the July 5 trading debut in Shanghai because it is "a must-buy for most funds."
The stock was priced at a discount to its Hong Kong shares, which have risen 15 percent since they started trading on June 1 after raising US$11.2 billion in the world's fourth-biggest initial public offering. The lender's Hong Kong-traded shares were unchanged at HK$3.425 apiece at 3:36 p.m. yesterday.
Bank of China is the biggest of five companies to sell shares since the lifting of the ban, which ended a five-year market slump. The Shanghai index, which tracks yuan-denominated A shares and U.S. dollar B shares, has jumped 41 percent this year, while the Shenzhen composite, which tracks the smaller of China's two stock markets, has gained 52 percent.
Industrial & Commercial Bank of China, the nation's biggest lender, Air China Ltd., the biggest international carrier, and Aluminum Corp. of China, the biggest producer of the metal, are among other companies planning to sell shares on domestic exchanges as the government seeks to raise the market's quality.
China CAMC Engineering Co., the first company to go public since the ban was lifted, drew 213 billion yuan of bids, or 481 times the shares on offer. The company's shares jumped more than fourfold on their June 19 debut on the Shenzhen exchange, prompting a probe by regulators.
The Shanghai composite fell 18 percent in the five years through 2005 even as China's economy almost doubled, because the smaller, state-owned manufacturers that dominate the market weren't the drivers of the world's fastest-growing major economy.
China halted new share sales last year to prevent a flood of equity as companies pursued plans to make more than US$200 billion of state-owned stock tradable. The government resumed offerings on May 18 after the moratorium helped end a four-year slump in the Shanghai and Shenzhen benchmark indexes.
Bank of China has a market capitalization of about US$109 billion, more than 100 times the size of CAMC Engineering or Datong Coal Industry Co., the first company to go public on the Shanghai exchange since sales resumed. Datong Coal shares jumped 63 percent on their first day of trading on June 23.