Money

Retail crowd shows muted interest in ABC IPO

(Agencies)
Updated: 2010-06-30 16:03

When ICBC went public, queues at bank branches went out the door and around the corner, with police and security called in to maintain order, but the offering of China's largest bank by assets came during a bull market.

China's stock market had fallen around 20 percent from mid-April until a week ago, and dropped further on Tuesday. But that has not completely deterred retail investors, who are allowed to subscribe to at least 5 percent of the Hong Kong IPO and as much as 15 percent depending on demand.

"It's a very suitable investment," said a 50 year old unemployed man surnamed Cheung. Employed or unemployed, Hong Kong's population is famous for its heavy interest in IPOs.

"ABC is not a risky investment," he said, after arriving at an HSBC branch in Hong Kong's Mong Kok district. "It's stable."

For institutional investors seeking China exposure and a lift for their portfolios, the jury is still out on ABC. Global markets are dropping along with China's stock market, on liquidity concerns, the euro zone sovereign debt crisis and other factors.

ABC prices on or around July 6, allowing plenty of time for a market pick-up or drop ahead of the July 15 debut in Shanghai. It plans to list on July 16 in Hong Kong under the trading symbol "1288".

Corporations known as cornerstone investors have bought up more than $5 billion of the Hong Kong offering already, a deal aimed at raising up to $11.4 billion excluding a 15 percent over-allotment of shares. The Shanghai deal is aimed at raising just under that amount.

Special Coverage: Focus on ABC's IPO Related readings:  ABC to launch $11.4 billion HK IPO   ABC IPO may raise $20b on Shanghai price  ABC to announce pricing of A shares today  ABC float raises buzz in market circuit

Standard Chartered Plc will invest $500 million as a cornerstone investor in the Hong Kong offering, the bank said in an e-mailed statement on Wednesday.

Mutual funds are expected to be highly interested in the stock, although a Reuters poll indicated that any price above 1.5 times book value would be perceived as expensive.

Individual investors seem undeterred however, despite a more muted turnout that other Hong Kong IPOs.

"I'm going to buy this for myself, and my kids, and treat it as a long-term investment. I plan to subscribe to HK$300,000-worth of shares," said a man surnamed Kwok, 58, said in Hong Kong's central district, adding that the amount of big funds and corporations that had come into the IPO beforehand gave him confidence. ($1=HK$7.784)