ICBC makes history with record US$19 billion IPO in dual listing in 2006 - SCMP archive

Shares of Industrial and Commercial Bank of China jumped a relatively modest 14.7 per cent on their Hong Kong debut and a lacklustre 5.1 per cent in Shanghai as the world’s largest-ever initial public offering finally came to market.

The debut immediately catapulted China’s largest lender into the top ranks of global banks as measured by market capitalisation. It seized the No 5 spot, just behind JP Morgan Chase of the US and ahead of Japan’s Mitsubishi-UFJ.

For a bank that many observers once thought would never pull off an IPO this year because of its history of mismanagement, corruption, and bad loans, the sale was a signal achievement.

At US$19.1 billion, it eclipsed the previous record holder, the US$18.4 billion IPO by Japanese mobile phone operator NTT Docomo in 1998. The gap will widen when ICBC exercises an overallotment option to sell more shares, raising the total to US$21.9 billion.

The sale also marked the first time a stock debuted simultaneously in both Hong Kong and Shanghai.

Investors explained away the sharp disparity in first-day performance between the two markets as merely reflecting the immaturity of the mainland market and the far greater amount of capital available in Hong Kong.

ICBC shares climbed as high as HK$3.63, or 18 per cent above its offering price of HK$3.07, shortly after the Hong Kong opening, before slipping back to close at HK$3.52.

The debut values the mainland lender at about US$149 billion, calculated by multiplying the shares outstanding by the H-share closing price. The market capitalisation will climb to about US$151 billion after it sells another 5.3 billion H shares under the overallotment option.

The bank ranks only seventh in market capitalisation among Hong Kong-listed stocks if only the H shares are considered.

Roughly 75 per cent of the shares were sold in Hong Kong in a deal that was heavily oversubscribed. Although mainland investors also ordered more shares than were on offer, demand was less brisk.

ICBC was the most actively traded stock in Hong Kong, with 10.63 billion shares changing hands for HK$37.45 billion, about half the day’s total. The value was the largest ever for a single listed company on a single trading day in Hong Kong.

The bank settlement system processed a record HK$1.37 trillion yesterday, including both the refund cheques for unsuccessful share orders and the day’s trading.

If the Hong Kong debut was one for the record books, the Shanghai performance was ho-hum. ICBC’s yuan-denominated A shares rose just 5.1 per cent above the 3.12 yuan offer price to close at 3.28 yuan.

Analysts and fund managers said the relatively poor performance in Shanghai was expected.

For one thing, the mainland market lacked the huge pool of capital controlled by institutions that fuelled Hong Kong, said Lewis Wan, chief investment officer at Marco Polo Investment Group, which invests in both H and A shares. Institutional investors account for about 30 per cent of the mainland market, but about 70 per cent in Hong Kong.

Hong Kong’s huge market in warrants, which require issuers to hold the underlying shares, also gave Hong Kong-listed shares a boost, Mr Wan said. The mainland lacks such instruments.