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Postal Savings Bank of China makes tepid debut on Hong Kong bourse

Source: AFP | September 28, 2016, Wednesday | Online Edition

POSTAL Savings Bank of China (PSBC) made a low-key debut on the Hong Kong bourse Wednesday, despite notching up the world's biggest IPO in two years aimed at expanding the business.

China's fifth-biggest lender raked in a colossal US$7.4 billion in the flotation, with a report in the Chinese language financial news portal Caixin saying a fund linked to investment guru George Soros was among the initial investors.

But the firm's first day of trading saw it post a tepid rise in the morning session with analysts saying the muted response was expected, due to the glut of options in Chinese banking.

"We have already got a lot of Chinese banks in the market. The ones (already) publicly traded are cheaper," said Jackson Wong, associate director of Hong Kong-based Simsen Financial group.

Because of this, he said there was a "limited upside" for newly-listed Chinese banks.

Selling pressure would also be low, as investors tended to hold Chinese bank shares long-term, he added.

The company was at HK$4.77 by the break, from its HK$4.76 listing price. However, it was outperforming the wider Hang Seng Index, which was down 0.64 percent.

PSBC's huge initial public offering was the biggest since Chinese internet giant Alibaba floted in New York in 2014, which raised $25 billion, although it was below its targeted $8.1 billion.

PSBC chairman Li Guohua described the launch as "successful" and an "important milestone" for the company.

"The successful public listing... clearly shows the intrinsic values of Postal Savings Bank are broadly endorsed by investors," he said at the stock's launch ceremony in Hong Kong's Central financial district.

Charles Li, chief executive of the city's exchange, who also took part in the ceremony, said cornerstone investors are "no better or worse" than any others.

"Obviously in any market we hope everybody will be buying... (but) we respect the market," he told reporters.

 'Growing business' 

PSBC is China's fifth-largest lender with 40,000 branches -- more than any other bank in the country -- and around 70 percent in rural areas.

Founded in 2007, it provides basic banking services to farmers and agricultural business owners, and it is the only financial institution present in some of the country's most remote regions.

In its prospectus the firm said: "We intend to use the net proceeds... to strengthen our capital base to support the ongoing growth of our business."

According to the latest figures, PSBC's total assets reached 7.7 trillion yuan (US$1.15 trillion) by March. Its net profit rose 11 percent year-on-year in the first quarter to 12.48 billion yuan.

Previously completely state-owned, PSBC raised 45.1 billion yuan by selling a 16.92 percent stake to 10 strategic investors in December, valuing the firm at $40.6 billion.

In comparison, Deutsche Bank AG is worth US$16 billion, Goldman Sachs is worth US$69 billion and Industrial & Commercial Bank of China Ltd., China's biggest lender, is worth US$235 billion, according to Bloomberg News.

Among the buyers were e-commerce giant Alibaba's affiliate Ant Financial, and Tencent, another Internet behemoth.

Despite the tepid start, Bloomberg said PSBC's first morning performance was in line with other financial IPOs in Hong Kong.

Agricultural Bank of China rose 2.2 percent on its debut in July 2010, while this year two smaller banks -- Bank of Tianjin and China Zheshang Bank -- were both unchanged.

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