Investment

Everbright shares shine in Shanghai

By Eva Woo (China Daily)
Updated: 2010-08-19 15:21

Yu Zhengsheng, Party secretary of Shanghai municipality, hits a gong to mark the bank's listing on the Shanghai Stock Exchange in Shanghai on Wednesday. Qilai Shen / Bloomberg

BEIJING - China Everbright Bank Co shares rose 18 percent on their debut in Shanghai after completing the nation's second-largest initial public offering this year, as the stock market recovers from a three-month slump.

The shares advanced to 3.66 yuan (54 US cents) at the close of trading from the IPO price of 3.1 yuan. Everbright Bank's gain outpaced the Agricultural Bank of China Ltd, which rose 0.8 percent on its debut in Shanghai last month after a world-record $22.1 billion IPO.

All 13 companies that went public in China this month before Wednesday have surged from their IPO price, data compiled by Bloomberg shows.

"The Chinese IPO market has regained momentum recently after dipping briefly in the middle of the year," said Josef Schuster, the Chicago-based founder of IPOX Capital Management LLC, which oversees $3 billion. "We also look at that as an important indicator for global sentiment."

At 18.9 billion yuan, Everbright Bank's IPO was the second-largest in China in 2010, a year dominated by small deals until the Agricultural Bank's offering in Shanghai and Hong Kong.

The Shanghai Composite has rebounded since early July after slumping as much as 28 percent from the start of the year.

The recovery has boosted IPOs. Jiangxi Ganfeng Lithium Co shares almost tripled on their first day in Shenzhen on Aug 10.

Loans clampdown

Before Everbright Bank's IPO, the 10 lenders that sold shares in Shanghai in the past four years jumped an average 56 percent on debut, according to data compiled by Bloomberg. Agricultural Bank had the worst first-day performance in the group.

China's government has tried to rein in bank lending this year, as regulators grew concerned that the unprecedented loan spree of 2009 had fueled asset bubbles and increased the risk of surging delinquencies.

The China Banking Regulatory Commission ordered banks to transfer off-balance sheet loans onto their books and make provisions for those that may default. The regulator had earlier tightened scrutiny of lending to local government financing vehicles and banned mortgages for property speculation.

Chinese banks have announced plans to raise more than $84 billion in stock sales since Jan 1 to better withstand a potential increase in bad loans.

IPO delayed

"The market is re-rating the banks that have been hit recently because of a slew of government policies," said Tang Yayun, a Shanghai-based analyst at Northeast Securities Co.

"The worst is probably over for banks in terms of policy risks, and now that they are adequately armed with capital, investors will focus on expansion and growth."

Everbright Bank, which had been planning an IPO since June 2008, scaled back share-sale plans by 30 percent after stocks slumped, Chairman Tang Shuangning said on July 22. The Shanghai Composite fell 23 percent in the second quarter.

The lender said on Aug 16 that it had first-half profit of 6.8 billion yuan, compared with 7.6 billion yuan for all of last year. Everbright didn't provide earnings figures for the year-earlier six-month period.

Bloomberg News