Extraordinarily heavy demand from retail investors in mainland China helped Industrial & Commercial Bank of China raise at least $19.1bn in its initial public offering, setting a global record.
The tranche of the offering directed at mainland retail investors was 49 times subscribed with demand reaching Rmb650bn ($80bn), an unprecedented level for the Chinese capital market.
The huge interest in the offering is a measure of sums potentially available to the Chinese equity market given the high savings rate and limited alternatives for individual investors.
The thirst for the IPO among Shanghai retail investors pushed total demand through $500bn. The bank had previously booked orders worth $350bn for its Hong Kong institutional offer, $55bn for its Hong Kong retail tranche and about $25bn for its Shanghai institutional offering.
The response to the ICBC offering helped lift Hong Kong’s Hang Seng index to an intra-day peak of 18,148.04 – about 1.5 per cent short of its record in March 2000. The index closed 0.7 per cent higher at 18,113.55.
Hong Kong’s China Enterprises index of mainland H shares rose 1 per cent, topping 7,500 for the first time since early 1994. ICBC will sell H shares in Hong Kong at HK$3.07 each and Shanghai-listed A shares at Rmb3.11 each, both at the top end of the forecast range. When the shares trade on October 27, it will be the first simultaneous listing in Shanghai and Hong Kong.
The demand among Hong Kong retail investors, who subscribed their tranche 78 times, means this slice will be increased to 10 per cent of the shares on offer in the territory. This will raise the total of the IPO to $21.9bn. Had it been 100 times subscribed, the clawback would have increased to 20 per cent.
Zhu Haibin, analyst of Guangda Securities in Shanghai, said that mainland investors had been heavily influenced by the zealous reception ICBC’s shares received on Hong Kong.
But Shanghai’s retail subscriptions dwarfed even the record demand triggered by ICBC’s offering in Hong Kong, where $55bn chased the five per cent of shares initially reserved.
While ICBC’s offering triggered fervour earlier this week in Hong Kong, with long investor queues for subscription forms, it is not clear how much of the mainland Chinese demand came from individual investors. In Shanghai, institutional investors can also apply for retail tranche shares.
The previous record for retail orders in Hong Kong was $35bn set by Bank of China’s IPO this year.
Since the Chinese authorities lifted a year-long moratorium on IPOs in Shanghai and Shenzhen in May, share issuance has soared. According to JPMorgan, ICBC’s IPO will increase issuance over the past six months to about $15bn, beating the previous annual record of $10bn in 2000.
Additional reporting by Christopher Brown-Humes in London