$15.6b is raised in Bank of China float

HONG KONG - Bank of China, the second of the "big four" Chinese state lenders to go public, raised HK$75.4 billion ($15.6 billion), completing the world's biggest first-time share sale in six years, bankers involved in the deal said.

China's second-largest lender sold the shares at HK$2.95 apiece, HK5c below the top of its target range. The stock debuts in Hong Kong on June 1.

Tumbling stock prices in emerging markets failed to deter investors, who are betting that loan demand will keep growing in an economy that expanded almost 10 per cent over the past three years.

The excess demand augers well for a share sale of as much as US$12 billion ($19.2 billion) planned by Industrial & Commercial Bank of China.

The fund-raising was completed amid a slump in global stock markets, driven by concern that the US Federal Reserve will keep raising interest rates to damp economic growth.

Hong Kong's benchmark Hang Seng Index has fallen 7 per cent to a 1 1/2-month low since May 11, while the Morgan Stanley Capital International Emerging Markets Index completed its longest rout in almost eight years.

China-linked shares in Hong Kong also fell after the People's Bank of China pledged to step up efforts to rein in lending.

The bank's sale price represents about 2.18 times the company's forecast book value in 2006.

China Construction Bank, the smallest among the big four as of December 31, raised US$9.2 billion in its October IPO and is trading around 2.43 times its book value. Bank of Communications, the fifth-biggest by assets, raised US$2.17 billion in July and is trading at 2.65 times.

Royal Bank of Scotland will own 4.438 per cent of Bank of China after the IPO and may have its stake cut to 4.369 per cent if the Chinese lender sells an additional 15 per cent of shares.

The Edinburgh-based bank led a group last August to buy 10 per cent of Bank of China for US$3.1 billion. The stake will be 8.6 per cent after the share sale. Merrill Lynch and a foundation set up by Hong Kong billionaire Li Ka-shing are part of that group and will own a combined 2.85 per cent after the IPO.

Temasek Holdings will own about 4.8 per cent.

- BLOOMBERG