Bank of China (BOC) could become the first company to launch an initial public offering (IPO) on the domestic bourse's main board by issuing around 20 billion yuan (US$2.5 billion) of A shares in June.

Investors put application forms into the collection box for the initial public offering of Bank of China before the deadline in Hong Kong May 23, 2006. Bank of China is expected to price its IPO, worth up to $9.8 billion, at or near the top of its indicated range, but turbulent global markets could have curbed retail oversubscription levels. [Reuters]

Wang Zhaowen, a spokesman for BOC, yesterday confirmed the bank will issue A shares very soon. But he did not give a timetable.

However, domestic business newspapers yesterday reported that the bank will likely be listed in June on the Shanghai Stock Exchange.

"The bank will probably become the first IPO on the domestic bourse's main board," China Business News said yesterday, quoting an investment banker who participated in the bank's listing issues.

The Shanghai-based Guotai Jun'an Securities, the Beijing-based CITIC Securities and Galaxy Securities have been hired as underwriters, a Guotai Jun'an staff member close to the deal told China Daily.

Speculation about the timing of the share issuance is based on fact, he indicated.

"As the Chinese saying goes, there are no waves without wind," he said, declining to be named.

"When to issue A shares depends on the performance of the A share market," BOC Spokesman Wang responded, adding that the bank will keep a close watch on the market and then decide when is the right time to act.

"It also depends on the trading of BOC's H shares in Hong Kong," Wang said.

According to Wang, BOC has already got the go-ahead from the relevant authorities including the China Securities Regulatory Commission (CSRC) to issue A shares.

"In fact, issuing A shares on the domestic bourse is part of BOC's whole listing plan and we have already got approval from the CSRC. But there are still some details that need the CSRC's approval."

Wang said the total volume of A shares and H shares together will account for 15 per cent of BOC's total equity.

The bank has already issued US$9.8 billion of H shares.

"The number of A shares will not be more than 10 billion, capping approximately 20 billion yuan (US$2.5 billion)," Xiao Gang, chairman of BOC said last week in Hong Kong. If so, A shares will account for 3 per cent of the bank's equity.

The government's recent lift of the year-long ban on IPOs in the domestic bourse has encouraged many banks who need cash to issue A shares to increase their capital-adequacy ratio, a key factor when evaluating a bank's competence.

Last week, the Fujian-based Industrial Bank also announced it would issue A shares very soon and probably be one of the first banks to do so.

According to Li Renjie, president of the Industrial Bank, it passed IPO application materials to the CSRC at the end of last year.

Analysts pointed out that A-share issuance could turn out to be a double-edged sword for bank shares in the domestic market.

"The issuance of H shares is likely to benefit BOC's A share price as the H share price, which is higher, would be taken by investors as a reference point," said Li Minya, an analyst with the Shenyin Wanguo Securities.

"But the stock of some other listed banks may be marginalized as institutional investors would first of all pick BOC for their bank stock portfolio," Li said.

BOC's A shares will be available to mainland investors and overseas buyers although the latter will only be permitted under a qualified foreign institutional investor (QFII) scheme, the bank said in its preliminary listing document.

(China Daily 05/30/2006 page9)