SHARES of Bank of Communications surged 71.4 percent on their debut in Shanghai yesterday in contrast to a slide in the broad market.
The Shanghai-based bank ended at 13.54 yuan (US$1.76) yesterday, way above its initial public offering price of 7.9 yuan for its yuan-backed A shares. The shares hit an intraday high of 14.99 yuan yesterday after opening at 14.2 yuan.
"The opening price is better than what I have expected," said Jiang Chaoliang, chairman of the bank, at a ceremony to launch its A-share debut.
The lender netted 25.2 billion yuan in selling 3.19 billion yuan-backed A-shares in Shanghai at 7.9 yuan each, the upper limit of the offering price range. The bank received orders worth more than 1.45 trillion yuan in April for the shares, setting a record high.
BoCom is the 10th mainland listed lender. The Chinese partner of HSBC joins rivals like Bank of China and Industrial & Commercial Bank of China, which are listed on the mainland's stock market.
"Assets of BoCom are relatively good among listed banks," said Zhang Qi, a Haitong Securities Co analyst. "However, the current pricing is beyond what they are worth now." Zhang said BoCom is reasonably priced at below 12 yuan now, a view echoed by She Minhua, a China Securities Co analyst. "Investors are keen on newly listed shares as they seek profit-taking chances as 'first buyers,"' said She.
The two analysts agreed shares of mainland-listed banks like BoCom and Citic Bank Co are currently overvalued.
Shares of Citic Bank more than doubled on their Shanghai debut on April 27. However, the shares fell 9.06 percent, almost hitting the daily trading cap on the next trading day. Citic Bank ended at 10.9 yuan yesterday, 18 percent higher than its opening price of 9.21 yuan on its debut.
Analysts recommend other listed banks such as China Merchants Bank, China Minsheng Banking Corp and Shanghai Pudong Development Bank as "buys."
BoCom's H-shares ended at HK$8.52 (US$1.09) in Hong Kong yesterday, up 1.1 percent. But BoCom bucked the overall sliding trend with its A-share performance in the broader stock market, where the benchmark Shanghai Composite Index tumbled 3.65 percent to end at 3,899.18 yesterday.
"The medium- and long-term bullish outlook of the A-share market is not likely to change while in the short-term, investor sentiment might be affected by liquidity tightening leading to a healthy correction in expectations of excessive returns," said Liao Qun, chief economist/strategist of China banking at Citic Ka Wah Bank.