Agricultural Bank of China, the country's No.3 bank by assets, is set to price its dual Hong Kong and Shanghai IPO late on Tuesday, determining whether it will become world's largest ever share offer.
AgBank's pricing will also provide a barometer of sentiment for other Chinese banks planning to raise billions of dollars more from investors worried about slowing growth, rising bad loans and tanking global stock markets.
A low-range price would help the chances of a first day jump in its share price, but would also back the view that AgBank, as the weakest of China's top four banks, is coming to market at a tough time.
China's benchmark stock index has lost nearly a quarter of its value since mid-April and fell sharply last week, partly due to investors selling stocks to raise money for the AgBank offer.
Mark To, Head of Research at Wing Fung Financial Group, said he believes that money will flow back into Chinese shares once AgBank lists, particularly toward mainland banks and property developers.
Investors have been on the sidelines waiting for the AgBank IPO but I see volume picking up once again after the listing as the fundraising has already been discounted in the stock prices and pessimism about the global economy tempers, he said.
The price range for the A-share offering is 2.52-2.68 yuan ($0.37-$0.40) per share while the Hong Kong price range was narrowed to HK$3.18-HK$3.38 per share on Monday.
If AgBank's offering is priced toward the top of the indicated range, and a greenshoe option is exercised to expand the offering by 15 percent, the IPO could still become the world's biggest ever, exceeding Industrial & Commercial Bank of China's $21.9 billion offering in 2006.
That would value AgBank at about $150 billion, ranking it the fourth biggest bank in the world by market capitalization behind ICBC, China Construction Bank and HSBC.
AgBank is going public because it has finally been able to shed its massive non-performing loan book, which only a few years ago was around 25 percent.
AgBank's offering of a 15 percent stake will complete Beijing's plans to have its four major banks go public, and will allow AgBank to use the IPO proceeds to boost its capital cushion after most Chinese banks went on a lending spree during the financial crisis.
Founded in 1951 by Mao Zedong as the rural unit of the central bank, it aims to list its shares in Shanghai on July 15, and in Hong Kong the following day.
Roughly half of both the Shanghai and Hong Kong offerings have already been subscribed to by major cornerstone and strategic investors, including sovereign wealth funds, banks, insurers and other major companies. Retail demand for both IPOs so far showing a tepid response.
Headed by Chairman Xiang Junbo, an award-winning scriptwriter and war hero, AgBank has 24,000 branches, 441,000 employees and 320 million customers -- more than the population of the United States.
BENCHMARK FOR RIVALS
Bank of China and ICBC also have huge fund raisings planned.
The (AgBank) pricing would be a barometer of market demand for Chinese banking stocks, said Paul Lee, Hong Kong-based analyst at Tai Fook Securities. I don't see much good news about Chinese banks in the short term, he said, citing concerns over the share sales and worries about loans to local governments that could struggle to repay them.
Some investors are confident the market can absorb the $70 billion plus in bank fundraising plans headed their way by the year-end.
Capital markets should be able to stomach the issues as there is abundant liquidity out there and the dual-listing has been widely priced in, said Chen Xingyu, an analyst with Phillip Securities Research. The fact that it's listing in both Shanghai and Hong Kong is good for diverting capital so that it won't have a huge impact for any of them.
(Additional reporting by Michael Wei in Beijing; Writing by Michael Flaherty; Editing by Lincoln Feast)