U.S. News

China CITIC Bank Shares Jump in Share Debut


Shares in China CITIC Bank rose 21% in their Hong Kong trading debut and surged more than two-fold in Shanghai on Friday after its US$5.4 billion IPO, the world's largest this year, drew heavy investor demand.

Global investors looking to tap an economy that grew at 11.1% in the first quarter and surging consumer spending power have made China's big banks among the world's most expensive.

Shares in CITIC Bank, the country's seventh-largest, opened 21% higher in Hong Kong and were trading up 18% at HK$6.89 at the start of the trading session, compared with an IPO price of HK$5.86.

Its Shanghai shares opened 59% higher and were quoted at 12 yuan in early trading, for a gain of 106% above its IPO price of 5.80 yuan.

The stock's Hong Kong performance was in line with forecasts, while its Shanghai surge topped expectations.

The lender is just the second company to make a dual Hong Kong and Shanghai debut, following the $21.9 billion October 2006 IPO by Industrial and Commercial Bank of China, which was the world's largest-ever.

Investors have not seemed especially worried about China's efforts to curb bank lending to stave off economic overheating.

CITIC Bank's IPO valued its shares at 2.75 times its 2007 book value, and at 39 times its forecast earnings per share.

Big three state lenders Bank of China, Industrial and Commercial Bank of China and China Construction Bank trade at between 2.43 and 3.02 times 2007 book value in Hong Kong, while China Merchants Bank trades at 4.49 times.

Construction Bank trades at a forecast price to earnings ratio of 18.5 times, while China Merchants Bank trades at 28.4 times 2007 earnings.

By comparison, U.S. heavyweight Bank of America trades at 1.62 times 2007 book and 10.5 times forecast earnings, while Spain's Banco Bilbao Vizcaya Argentaria, which holds a 4.9% stake in CITIC, trades at 2.98 times book and 11.5 times 2007 earnings.

An over-allotment option is expected to be exercised, which would make the CITIC bank listing worth about US$5.95 billion.

CITIC Bank is the sixth Chinese lender to list in Hong Kong, and its predecessors have seen their shares end their debut days as much as 25% higher. The worst day-one performer, China Construction Bank, ended its opening session unchanged.

The listing was arranged by China International Capital, CITIC Securities, Citigroup, HSBC and Lehman Brothers.