China bank shares hot on debut

HONG KONG - Shares in Bank of Communications, China's fifth-biggest lender, rose as much as 16 per cent on their Hong Kong trading debut, as investors speculated that ties with HSBC Holdings will spur consumer lending and improve management.

The lender, 20 per cent owned by HSBC, rose as much as 40HKc to HK$2.90.

Bank of Communications raised HK$14.64 billion ($2.64 billion) in the initial public offering, after attracting orders for more than 25 times the amount offered.

The sale, the first by a China-based bank overseas, was priced at a lower valuation than Hong Kong-traded banks.

HSBC plans to co-operate on a credit card venture and has sent executives to improve risk controls at the Shanghai-based bank, whose bad-loan ratio is already lower than the four bigger state-owned lenders.

"HSBC is a vital factor," said Tim Leung at IG Investment Management (Hong Kong). "The share price should hold up as the valuation is in line with comparable rivals and it's the first share sale by a bank operating in China."

China's economy, the world's seventh-largest, grew 9.5 per cent last year.

The sale is a litmus test for other IPOs by China's banks this year.

China Construction Bank, the nation's third-biggest lender, plans to sell shares by the end of the year. China Minsheng Banking Corp, the country's first privately owned bank, said on Monday that it had delayed its IPO in Hong Kong planned for this month.

- BLOOMBERG