Shenyang-based Shengjing Bank has joined the long queue of mainland companies waiting to get floated in Hong Kong, but mainland lenders intending to list in the SAR are facing increased competition. Provided to China Daily

Shenyang lender sets IPO price at HK$7.56 amid lukewarm sentiment

Shengjing Bank Co - the biggest city commercial lender in northeastern mainland - plans to offer shares at HK$7.56 each in its HK$10.4-billion ($1.3-billion) initial public offering (IPO) in Hong Kong.

The offer is well below the top of the HK$7.43-HK$7.81 price range initially marketed by the bank in the sale of 1.4 billion shares in the SAR.

"A relatively low offering price reflects the market's tepid investment sentiment," observed Ringo Choi, Asia-Pacific IPO leader of Ernst & Young.

"Investors are weighing the company's return rate and short-term growth rate compared with those of the four major State-owned banks, as well as the bank's scale and economy growth in Shenyang," he said.

"Another reason may be that it had been overpriced previously," Choi said. "But, issuing below the midpoint of a marketed range doesn't mean that the share is cheap," he added.

"An attractive price is the key to Hong Kong investors seeking to invest in mainland banking stocks," said Ben Kwong Man-bun, chief operating officer at KGI Securities.

"Mainland banking stocks are facing fiercer market competition since there are more alternatives for them to choose from," he said.

However, Ernst & Young believed that the lukewarm investment sentiment toward Shengjing Bank, as an individual case, would not weaken the bullish prospects for State-owned financial enterprises' contributions to Hong Kong's IPO market next year.

Shengjing Bank, headquartered in Shenyang, Liaoning province, and owned by the city government, is the biggest commercial lender in the northeastern mainland based on total assets and net profit. It's the fourth mainland regional commercial bank planning to list in Hong Kong following Bank of Chongqing, Huishang Bank and Harbin Bank.

KPMG said earlier this week in its Hong Kong IPO outlook for next year that the pipeline for sizable IPOs remains strong, primarily leaning toward the financial-services sector.

"The market anticipates more listings of mainland local government-owned banks, such as Bank of Beijing, Bank of Shanghai and China Guangfa Bank," Rebecca Chan, a partner of Hong Kong Capital Markets Group at KPMG China, said.

Kwong said that since it's harder for lenders to maintain a deposit growth because of rates cuts, growing pressure on the capital adequacy ratio will push them to float in Hong Kong.

Shengjing Bank's prospectus shows it will start trading in Hong Kong on Dec 29. Five major investors, including Chow Tai Fook Nominee Ltd, would buy a combined $700 million worth of the bank's shares.

The bank had total assets of 449.1 billion yuan at the end of June this year, while profits rose by 16 percent to 2.5 billion yuan in the year's first half, compared with a year ago, according to the prospectus.

gladdy@chinadailyhk.com

(HK Edition 12/20/2014 page6)