China Construction Bank (CCB) made a strong debut on Tuesday on the Shanghai Stock Exchange as its shares jumped 32.25 percent from its initial public offering (IPO) price to close at 8.53 yuan.
The bank opened 32.56 percent higher at 8.55 yuan per share, 2.1 yuan higher than its IPO price. The price jumped to 9.05 yuan per share in the morning session and then remained under nine yuan.
CCB overtook the Industrial and Commercial Bank of China (ICBC) to become the largest stock on the A-share market.
The market value was not so important as the core competency and compared with leading international banks, CCB still had some way to go, said Guo Shuqing, chairman of the bank, at Tuesday's press conference.
More than 99 percent of CCB revenues came from the mainland and the A-share listing would help it to grow faster and better, said Guo.
The country's second largest commercial bank, CCB raised 58.05 billion yuan (7.7 billion U.S. dollars) in its Shanghai IPO.
The CCB IPO was the biggest ever domestic listing, exceeding the 46.6 billion yuan raised by the ICBC in October last year.
The share price was set by the current market and could not be compared with ICBC's IPO price a year ago, said Guo.
The bank, Chinese partner of the Bank of America, set the price for its IPO at 6.45 yuan per share, the high end of its price range, due to record subscriptions. The price translated into a price-to-earnings ratio of 32.91.
The bank's debut attracted 2.26 trillion yuan in subscriptions for its yuan-denominated A-share sale, exceeding the 1.9 trillion yuan on the IPO of the Bank of Beijing, the country's largest city commercial bank, last week.
Analysts said investors sought CCB shares because of its profitability and growth prospects.
The bank issued nine billion shares, less than 3.85 percent of the expanded capital after the IPO and the proceeds would be used to boost its capital adequacy ratio.
The bank's earnings per share in the first half of 2007 was 0.15 yuan, compared with 0.12 yuan for the ICBC and Bank of China.
Its non-performing loans ratio stood at 2.95 percent at the end of June, lower than the 3.29 percent half a year earlier.
The CCB's A-share listing will be followed by China Shenhua Group and PetroChina. The string of IPOs will stable the market by providing more stock supply as heavyweight stocks have a larger share in the market, said Guo Tianyong, banking expert with China University of Finance and Economics.
Before the CCB debut, the top 50 stocks on the A-share market accounted for 60 percent of the total market value. A one-cent change in the ICBC share price resulted in a one-point change in the Shanghai Composite Index.
As the market has more heavyweight stocks, a single stock would have less influence on the major index and the Shanghai Composite Index would be more representative of the market, said Guo.
Bank stocks account for 40 percent of the A-share market value. The listing of PetroChina and China Shenhua would change the structure and make it more reasonable, said Guo.
Li Xunlei, analyst with Guotai Junan Securities, said that the listing of big companies would make it difficult to monitor the stock index.
The A-share IPOs raised 149.2 billion yuan (19.9 billion U.S. dollars) in the first eight months and in September only, the market would raise about 140 billion yuan (18.7 billion U.S. dollars).
Source: Xinhua
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