Third time's no charm for Hong Kong’s biggest IPO
Shares of China Everbright Bank fell by as much as 5 percent in their debut on the Hong Kong stock exchange on Friday, as investors balked at the high issue price amid ongoing concerns about China's bad debt problems.
China's 11th biggest bank by market capitalization, which raised $3 billion in the city's biggest initial public offering (IPO) this year, saw its stock fall to as low as 3.78 Hong Kong dollars ($0.48) in early trade, versus its listing price of 3.98 Hong Kong dollars. The benchmark Hang Seng was down about 0.3 percent in comparison.
The shares were priced at a premium to their Shanghai-listed shares, which closed at 2.78 yuan on Thursday, or 3.55 Hong Kong dollars.
(Read more: Get ready for China's next IPO tidal wave)
"I think it's probably been mispriced. That's normally what happens when highly marketed and anticipated IPOs come to market," Clay Carter, head of international equities at Perennial Investment Partners, told CNBC.
"I think it will remain under selling pressure for a while because the allocation is too generous. People may have too many shares so they may unload," added Alex Wong, director at Hong Kong-based Ample Capital.
This is China Everbright Bank's third attempt at listing in Hong Kong. The bank was forced to scrap its listing in August 2011, around the onset of the euro zone debt crisis. In May 2012, it shelved a second IPO attempt amid a bearish market in Hong Kong because of the U.S. fiscal cliff.
But it appears the third time is not the charm, and analysts say the selling pressure on the Chinese lender will continue as investors steer clear of traditional banking plays, with non-performing loans (NPLs) in the sector continuing to rise.
According to the China Banking Regulatory Commission, commercial banks' NPLs at the end of June totaled 539.5 billion yuan ($88.1 billion) – nearly 1 percent of outstanding loans.
(Read more: China cash rates jump on liquidity worries)
But Everbright will brave market sentiment as the lender is in need of funds to strengthen its capital adequacy ratio, which is expected to be raised by one percentage point from the current 9.65 percent from funds generated by the IPO.
"[Everbright] really lacks capital that's why it has come to Hong Kong market again and again to raise capital. In their prospectus, they warned that they were the ones that defaulted in the interbank market in June," said Francis Lun, CEO of GEO Securities in Hong Kong, referring to the cash crunch in China in late June saw the benchmark seven-day bond repurchase rate spike to a record high of 11.2 percent, roiling global markets as a result.
IPO rush to Hong Kong
China Everbright bank isn't alone in listing in Hong Kong on Friday. Four other IPOs also came to market, on top of another five that listed on Thursday.
Analysts say Chinese companies desperate for cash are flocking to Hong Kong, after the China Securities Regulatory Commission moved to ban initial public offerings on the mainland last year.
(Read more: Year winds down, HK IPOS just ramping up)
"The need for capital for Chinese companies is so huge that they will come to Hong Kong again and again because the A-share market has been shut down for IPOs for quite some time now. So they have no other choice," said GEO Securities' Lun.
"So the place where you can get a lot of money and quickly, where the environment is friendly, is Hong Kong. So I think next year, HK may regain the top spot for IPOs in the world," he added.
—By CNBC's Li Anne Wong. Follow her on Twitter @LiAnneCNBC