Shares in Bank of Beijing doubled in their debut on Wednesday, lifted by strong investor interest in new shares and upbeat prospects for the domestic banking sector as the country's economy keeps growing strongly.
Beijing Bank's local-currency A shares opened on the Shanghai Stock Exchange at 23.00 yuan, up 84 percent from their initial public offer price of 12.50 yuan. Analysts had expected the shares to nearly double on their debut.
They rose further to an intraday high of 25 yuan by 0145 GMT, about 15 minutes after trading started.
Shares in the medium-sized Chinese bank's IPO were 125 times oversubscribed, attracting more than $250 billion in funds to a $2 billion sale, setting a record for subscriptions to an IPO in China's domestic market.
Its issue of 1.2 billion A shares, aimed at strengthening its capital base, accounted for 19.27 percent of its expanded capital after the IPO.
The near-term prospects of China's banking sector are very strong due to the robust economy, said industry analyst Wu Yonggang at Guotai Junan Securities.
Bank of Beijing will enjoy relatively faster growth among its peers partly because it is located in the Chinese capital and its business will be buoyed by next year's Olympic Games.
Beijing Bank, the third city bank to be listed in China, had a market share of 7.72 percent in deposits and 10.80 percent in loans in the Chinese capital in 2006, respectively in fourth and third place among 15 banks operating in the city, including China's four largest state-run banks.
China's annual gross domestic product growth surged to 11.9 percent in the second quarter from 11.1 percent in the first three months, putting the economy firmly on course for a fifth straight year of double-digit expansion.
China's banking stocks have surged this year, boosted in addition by the stock market's bull run, appreciation of the yuan, robust lending growth and rising non-interest income from businesses such as credit card services and wealth management.
Some analysts said they expected Bank of Beijing's earnings to grow more than 30 percent per year on average in the next three years, with growth in 2007 alone exceeding 40 percent.
At its intraday high, Beijing Bank's shares were trading at a price to earnings (PE) ratio of 52 times analysts' estimated 2007 earnings of 0.48 yuan per share.
That was below the forecast PE of Bank of Nanjing and Bank of Ningbo, the first two banks to go public among China's 120 or so city banks, but above the average for listed banks in China's banking sector overall.
Nanjing Bank had a PE ratio of 54 times against its forecast earnings of 0.40 yuan and Ningbo Bank 73 times against 0.34 yuan, based on prices in early trade on Wednesday. The average multiple for all Chinese banks listed on the Shanghai and Shenzhen stock exchanges is around 44 times forecast 2007 earnings, according to Reuters Estimates.
Beijing Bank's biggest single shareholder is Dutch financial services group ING Groep, whose stake was diluted by the IPO to 16.07 percent from 19.90 percent. Beijing municipal agencies and Chinese state firms collectively own a larger share of the bank.