BANK OF CHINA UP 15 PERCENT IN STOCK DEBUT

UNCLAS HONG KONG 002260

SIPDIS

SIPDIS

STATE FOR EAP/CM AND EB
TREASURY FOR OASIA GKOEPKE
STATE PASS USTR
USDOC FOR 4420

E.O. 12958: N/A
TAGS: ECON EFIN HK CH
SUBJECT: BANK OF CHINA UP 15 PERCENT IN STOCK DEBUT

REF: HONG KONG 2094


1. Having just concluded its initial public offering (IPO),
the Bank of China (BOC) began trading stock today in Hong
Kong. Shares rose 15.3 percent above the IPO price to HKD
3.40 (USD 0.44). Hong Kong's Hang Seng Index (HSI) fell 1.3
percent for the day, continuing a decline that has pulled the
index down nearly 10 percent since a recent May 8 peak and
raised concerns -- now dispelled -- about whether conditions
favored the success of the BOC IPO. Some of the HSI's fall
may reflect stockholders cashing out of constituent stocks in
favor of BOC, which is not one of the shares that makes up
the index.


2. BOC's IPO raised USD 9.7 billion, making it the largest
such offering in Hong Kong's history, the biggest IPO ever
for a mainland company, and the highest grossing IPO in the
world since the year 2000.


3. The high degree of enthusiasm for BOC going public was
carefully cultivated with sales of strategic stakes to
foreign investors and culminated with thousands of Hong
Kongers lining up to get a piece of the action. Last year,
two of China's five largest banks, China Construction Bank
and Bank of Communications, went public in Hong Kong, and
another of China's large lenders, the Industrial and
Commercial Bank of China (ICBC) is expected to list here
shortly, perhaps this fall. The listing process has served
as a catalyst for all of these banks to clean up balance
sheets, upgrade internal controls, and modernize operations,
all while helping Hong Kong rise to the position of the
world's fourth-ranked capital raising center. Reftel
provides additional background and context regarding the BOC
IPO.
Cunningham