Hong Kong - Shares for Industrial & Commercial Bank of China soared in Hong Kong but disappointed investors in Shanghai on Friday as China's largest lender launched the world's biggest initial public offering in the two stock markets.

VIP guests attend the ceremony of initial public offering of Industrial & Commercial Bank of China (ICBC)  October 27, 2006 at Shanghai Stock Exchange in Shanghai. ICBC's shares began trading Friday in Shanghai, part of a dual initial public offering with the Hong Kong Stock Exchange that raised a record US$21.9 billion (euro17.4 billion). [AP Photo] More about the ICBC IPO

ICBC's US$21.9 billion stock sale smashed the previous record, a US$18.4 billion IPO by Japanese mobile phone company NTT DoCoMo Inc. in 1998.

The stock's price rocketed up 14.6 percent to HK$3.52 (US$0.45) compared to its IPO price of HK$3.07 (US$0.39) per share. Analysts predicted the stock would rise between 10 percent to 15 percent.

The state-owned bank made history by simultaneously listing its IPO in Shanghai, but its "A shares" only gained 5.1 percent from their IPO price to close at 3.28 yuan. They had also been expected to shoot up 10 percent to 15 percent.

The weaker-than-expected debut might have been due to how stocks have slumped for the Bank of China, the country's second-biggest lender, said Zhuang Qianhua, an analyst at Huatai Securities. The bank's IPO rose 23 percent on July 5 in Shanghai but has been on a downward track ever since.

"I think it may be the memory of Bank of China's debut that deterred investors today," Zhuang said.

In the past year, three of China's Big Four banks have successfully gone public, selling US$42 billion worth of stock to international investors.

"They are buying for the China growth story," Francis Lun, general manager, Fulbright Securities Ltd., in Hong Kong. "China's economy is growing by 10 percent a year and ICBC is the largest bank in China. If it grows in tandem with the Chinese economy, I think it should be worth much, much more in the future."

But Lun noted that Chinese banks can be a risky investment because of a history of bad loans and bad management. ICBC received a US$15 billion injection from the government to clean up its balance sheet last year.

"If ICBC can clean up its balance sheet, improve its management and if nobody runs away with several hundreds of millions of dollars, that's the most important thing," Lun said.

Yiping Huang, economist at Citigroup in Shanghai, said much will depend on how the health of China's economy.

"The economy has been doing so well. When the economy is doing well, we don't see big financial risks," Huang said, noting that a slowdown would likely result in more bad debts.

In Shanghai, ICBC President Yang Kaisheng kicked off trading by banging on a gong, and he and other executives celebrated by sipping glasses of wine passed out by women in silk red dresses.

Yang Kaisheng, vice chairman and president of Industrial & Commercial Bank of China (ICBC) (R) celebrates after striking the trade starting gong during the ceremony of initial public offering of ICBC, October 27, 2006 at Shanghai Stock Exchange in Shanghai. ICBC's shares began trading Friday in Shanghai, part of a dual initial public offering with the Hong Kong Stock Exchange that raised a record US$21.9 billion (euro17.4 billion). [AP Photo] More about the ICBC IPO

"We will take this public offering as the first step, and continue to strive toward our goal of becoming a first-rate international financial enterprise," Yang said. "We will use better business and quality service to repay investors and our many customers."

Before clinking champagne glasses with leaders in Hong Kong, ICBC Chairman Jiang Jianqing gave a speech on the stock market's floor just ahead of trading. Jiang said the bank was a market leader that will continue to modernize.

"ICBC has a strong customer base, a large network of branches, a solid management style, leading technology. It's the leader in all the main business areas in the Chinese market," Jiang said.

The IPO's timing for the gargantuan bank, whose assets totaled 6.45 trillion yuan (US$816 billion) at the end of last year, couldn't be better.

After years of languishing in post dot-com bust and scandal-related doldrums, Shanghai's market has finally taken off, trading near five-year highs. Yuan-denominated A shares are up nearly 56 percent since the beginning of the year.

And Hong Kong's benchmark Hang Seng Index surged 1.1 percent to a record high of 18,353.74 on Thursday.

Over the past decade, China's best companies, such as PetroChina Co., Sinopec Corp. and China Mobile (Hong Kong) Ltd., have chosen to list shares in Hong Kong and other markets outside China, given the lackluster outlook for the domestic exchanges.

Current regulations prevent most Chinese mainland from openly investing in Hong Kong shares, and bar most foreign investors from buying yuan-denominated mainland shares.

But in the past year, regulators have carried out carefully orchestrated shareholding reforms aimed at shifting government-held, nontradable shares into the market. Most of the shares affected are subject to lockup periods, helping to alleviate uncertainties over a possible flood of new shares hitting the market.

The giant bank's trading debut marks a milestone in more than two decades of reforms aimed at transforming Chinese state-run lenders into truly commercial banks.

Goldman Sachs Group Inc., American Express Co. and Allianz AG of Germany together paid US$3.8 billion for an 8.89 percent stake in ICBC this year.