BEIJING, May 18 -- HONG KONG: Bank of China (BOC), which is expected to launch the world's largest initial public offering (IPO) in the last six years, will attract a great deal of individual investors with the opening of its retail tranche, analysts said.

    That signals overseas investors' increasing confidence in the mainland's banking sector.

    "Hong Kong residents now favour mainland banks," said Andes Cheng, an analyst with South China Research Ltd.

    "BOC (Hong Kong), Bank of Communications (BoCom) and China Construction Bank (CCB) all generated a lot of buzz when they floated their shares. BOC will not be an exception," said Cheng. He said he would personally buy some shares.

    Hordes of locals are expected to rush to securities houses and banks to subscribe to BOC shares, investing an estimated amount of more than HK$200 billion (US$25 billion) over four days, said Kingston Lin, Prudential Brokerage's associate director.

    Four years ago, local investors liked to talk about the huge amount of non-performing loans in mainland banks. But now they are willing to invest in these lenders for higher profits.

    This is because the banks have improved a lot since the introduction of overseas strategic investors, shareholding reforms and listing efforts, Cheng said.

    Citing BOC's cheap prices and high dividend payout ratio, some analysts said the largest-ever IPO launched by a mainland firm will attract more subscriptions than that of CCB's. CCB's US$9.2-billion deal was oversubscribed by 42 times last year, while BoCom's was oversubscribed by 204 times.

    BOC is selling 25.57 billion H shares, or 10.5 per cent of its enlarged share capital, for between HK$2.5 (30 US cents) and HK$3 (37.5 US cents) per share.

    The price values the lender at 1.9 times to 2.2 times its book value, which is at least 15 per cent cheaper than rivals CCB and BoCom.

    "It's pretty attractive," said Louis Wong, a director at Philip Asset Management.

    Even the recent setback of Hong Kong's stock market will not dampen investors' buying enthusiasm, Wong said.

    "Mainland banking stocks are relatively insulated from the recent market lull," he said.

    Hong Kong's benchmark Hang Seng index experienced the biggest one-day decline in nearly two years on Monday, dropping 2.41 per cent to 16,494.84.

    It continued to sink by 0.62 per cent the following day.

    Indeed, the lure of BOC's IPO has been on show even before the opening of its public offering; some analysts say it led to the lukewarm response to other IPOs. Enditem

    (Source: China Daily)