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China Construction Bank (CCB) shares ended flat on Thursday in its debut on Hong Kong stock exchange after making the world's biggest share offer in four years, as overall market sentiment was weak, dealer said.
Although stock in China's third-largest lender had traded higher by the morning close to 2.375 Hong Kong dollars (31 US cents), it ended the day unchanged at its initial public offer (IPO) price of 2.35 dollars.
Some 3.64 billion shares of the stock, worth 8.58 billion Hong Kong dollars, changed hands, making up 36 percent of overall market turnover.
Analysts say expected interest rate increases and rising concerns over the possible spread of avian flu held investors back, but the CCB share offering, in the long run, would give a shot in the arm to China's aggressive financial reform, which is vital for the healthy growth of Asia's second biggest economy.
"The listing not only injects huge capital to CCB," Tang Min, chief economist of Asian Development Bank (ADB) in China, said, "but also brings new management concepts and expertise, especially in the field of risk control."
CCB and the Bank of China (BOC) received 22.5 billion US dollars each from the central government to tidy up their balance sheets in efforts to clear the way to listing.
The Big Four state-owned banks, which also include Industrial and Commercial Bank of China (ICBC) and the Agricultural Bank of China (ABC), have long struggled with severe bad debt problems, a major leftover from the country's central planning days, in which reckless policy loans had to be extended to state-owned companies and local governments, analysts say.
The CCB listing breaks the state monopoly of the largest financial institutions and is expected to be followed by two other banks: BOC in early 2006 and ICBC in 2007.
Vice Premier Huang Ju urged state banks to strengthen corporate governance and internal control and upgrade their assets quality and earning abilities to better serve the Chinese economy.
"Going public is meant to bring greater transparency to the CCB management.
The market is evaluating it every day, every hour," Tang said.
His remarks were echoed by Yi Xianrong, a prestigious financial expert with the Chinese Academy of Social Sciences (CASS). "The CCB listing is a big event for China's reform in the banking sector and stands as a milestone in the Big Four reform."
In its initial public offering (IPO) earlier this month, CCB was finally priced at 2.35 HK dollars per share near the top end of its indicative price range of 1.90-2.40 dollars.
Of the total global offering of 26.49 billion shares, 25.16 billion were allotted to institutions, with the remaining 1.32 billion earmarked for retail investors.
Given the oversubscription by 42 times on the retail tranche, the number of shares to the public has been raised to 7.5 percent from 5.0 percent of the total number of shares on offer.
Credit Suisse First Boston Corp, China International Capital Corp and Morgan Stanley are the listing sponsors.
"The listing can not solve all the problems," CASS expert Yi Xianrong said.
"However, other methods will result in more difficulties and costs in reform."
"If CCB succeeds, then both BOC and ICBC will follow its lead," said Tang Min, the ADB economist. "Considering the financial sector's strategic status in China's reform, I believe the CCB's choice is worthwhile."
Loans granted by the Big Four account for more than half of the total of Chinese financial institutions. CCB, China's biggest property lender with 14,000 branches, says its market share for loans is 12 percent; that of deposits, 13 percent.
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