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Finance

China Bohai Bank prices Hong Kong's largest IPO toward low end

Conservative choice comes despite recent big debuts on mainland markets

The Stock Exchange of Hong Kong:  China Bohai Bank is set to debut on July 16.   © Getty Images

HONG KONG -- China Bohai Bank priced Hong Kong's largest initial public offering so far this year toward the lower end of the target range, according to two people familiar with the deal, even as mainland shares continued to surge.

The bank, based in the northeastern port city of Tianjin and backed by Standard Chartered Bank, set the IPO price at 4.80 Hong Kong dollars per share to raise about HK$13.82 billion ($1.78 billion). It has offered 2.88 billion shares in a range of HK$4.75 to HK$4.98 a share, according to its prospectus.

"The demand was there with the book more than well covered," one of the people said. "We priced based on investor discussions and also to support a strong opening."

The shares are scheduled to debut July 16, and the person said the tight pricing factored in the general nervousness in the market amid another wave of coronavirus infections in Hong Kong and elsewhere. Still, the pricing comes as the China CSI 300 index of the largest Shanghai- and Shenzhen-listed shares has surged 9% this week to a fresh five-year high and other Chinese IPOs have surged on opening.

Chinese technology company QuantumCTek set a market debut record by soaring more than 1,000% at one point on their first day of trading on the STAR Market in Shanghai. BlueCity Holdings, the company behind China's biggest gay dating app, closed on Wednesday, its first day as a listed company, 46% higher than the offer price on the Nasdaq. It had surged as much as 124% during the day.

Bohai's offering comes as IPO activity in Hong Kong surges despite China's imposition of a controversial national security law on the city. Hong Kong led global markets in equity raising last year, and already companies have sold a further over $12 billion of stock here so far in 2020, with Chinese-origin issuers accounting for 97% of the total, according to data provider Dealogic.

More than 30 companies filed for IPOs with the Stock Exchange of Hong Hong in June alone. PwC has forecast that total equity raisings in Hong Kong could reach HK$260 billion this year. Chinese vape device maker Smoore International starts trading on Friday after pricing its $918 million IPO at the top end of the range.

The momentum comes partly in response to moves by American politicians to raise barriers to Chinese companies' seeking to list or stay listed in U.S. markets amid escalating tensions between the two governments. Internet companies JD.com and NetEase raised around $6.6 billion combined in Hong Kong last month as they secured backup positions to their primary listings in New York. Reuters reported Thursday that Chinese video-sharing site Bilibili is considering a secondary listing in Hong Kong.

Bohai Bank said it plans to use the IPO proceeds to strengthen its capital base. S&P Global Ratings had singled out Bohai Bank in January as one of a number of Chinese banks coming under capital stress as their loan books weakened.

Under Bohai's listing plan, the ownership stake of state-owned TEDA Investment Holding, its top shareholder, would fall from 25% to between 20.34% and 20.85%, depending on whether the bank exercises an option to scale up the offering. Standard Chartered's stake would shrink from 19.99% to between 16.26% and 16.67%.

Bohai Bank, set up in 2005, posted a 15.7% rise in net profit last year to 8.19 billion yuan ($1.16 billion) and had 1.12 trillion yuan in assets as of March 31. Its core tier 1 capital adequacy ratio stood at 8.06% at the end of 2019, down from 8.61% a year earlier.

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