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Hong Kong. Agricultural Bank of China’s shares rose just slightly in the Hong Kong portion of its massive IPO on Friday, with a positive start seen as a matter of national pride for the world’s third largest economy.

The lender’s shares closed at 3.27 Hong Kong dollars (42 cents), a 2.2 percent rise on their 3.20 Hong Kong dollar initial public offering price.

The last of China’s “Big Four” state banks to go public could raise a record $22.1 billion in its mammoth dual offering, which opened in Shanghai on Thursday to a tepid investor response.

AgBank has not yet disclosed whether it will exercise an option to issue additional shares, a crucial factor in determining whether the sale would overtake rival Industrial and Commercial Bank of China’s record-setting $21.9 billion IPO in 2006.

AgBank chairman Xiang Junbo said in Hong Kong the flotation was an “historic moment” and “the first step of the internationalization of AgBank”.

He later added that he was happy with AgBank’s share price in light of stock market weakness: “I am very satisfied. It’s really not too bad — 3.30 dollars”, he said referring to the Hong Kong dollar share price.

Several heavyweight foreign investors had been drummed up to help make a success of the Hong Kong portion of the sale. Investors included Qatar’s sovereign investment fund, British bank Standard Chartered and Hong Kong’s richest tycoon, Li Ka-shing.

The biggest investor in the Shanghai issue was China Life, the nation’s largest life insurer by premium income.

Forty percent of the mainland shares went to 27 so-called cornerstone investors — mostly state-owned entities ranging from Cofco, China’s main grain producer, to China Aerospace Science and Industry to the operators of the Three Gorges Dam.

Despite the strong support from state-controlled and foreign investors, AgBank had scaled back its original IPO target of nearly $30 billion dollars amid choppy markets and questions about its balance sheet.

“The central government is going all out to make sure AgBank’s IPO is a success,” Francis Lun, general manager of Hong Kong’s Fulbright Securities, said. “They’re determined to make a good show. Otherwise they would lose face.”

AgBank had a lackluster debut in Shanghai on Thursday with its shares closing at 2.70 yuan — up 0.75 percent from the IPO price of 2.68 yuan, but lower than the opening price of 2.74.

The Shanghai-listed shares closed 0.4 percent lower on Friday at 2.69 yuan.

AgBank’s debut rise in both cities was modest compared with previous Chinese bank IPOs, many of which rose 10 percent on their first day, according to Bernstein Research.

AgBank was founded two years after Mao Zedong’s 1949 communist revolution with a mission to lend money to China’s poor farmers and distribute state money in rural areas.

Heavy exposure to China’s poverty-stricken interior meant that mission was frustrated by decades of chaotic policies, leaving it awash with bad debt.

Despite Beijing’s efforts to salvage AgBank, it is the weakest of China’s big banks and it remains to be seen whether it can shift from policy bank to a profit-driven company.

AgBank’s stock market debut came after Fitch credit ratings agency warned of growing risks in China’s banking system, with complex deals obscuring hundreds of billions in loans and possibly concealing a new batch of bad property and infrastructure lending.
 

Agence France-Presse