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Finance

China Bohai Bank seeks $1.8bn in Hong Kong's biggest IPO of 2020

Move shows how city set to remain key fundraising hub for mainland companies

Standard Chartered Bank's stake in China Bohai Bank is set to fall to around 16% from just below 20% under the IPO plan.    © AP

HONG KONG -- China Bohai Bank began marketing up to $1.85 billion in stock in Hong Kong on Tuesday in what will be the biggest initial public offering of the year so far in the city.

Coming the same day Chinese President Xi Jinping signed a controversial new national security law for the city, the IPO by the lender backed by Britain's Standard Chartered Bank underscores how the city is set to remain a key fundraising hub for mainland companies even as foreign governments criticize the legislation as undermining the autonomy that helped make the city a top global financial center.

Hong Kong led global markets in equity raising last year and already companies have sold a further $11.2 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 Exchange just in June. KPMG forecast on Monday that total equity raisings in Hong Kong could reach 250 billion Hong Kong dollars ($32.26 billion) this year.

The momentum comes partly as a response to moves by U.S. politicians to raise barriers to Chinese companies' seeking to be listed or stay listed on American exchanges amid escalating tensions between the two governments. Internet companies JD.com and NetEase raised a combined $6.6 billion in Hong Kong this month as they secured backup positions to their primary listings in New York.

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 upsize the offering. StanChart's stake would fall from 19.99% to between 16.26% and 16.67%.

The bank, based in the northeastern port city of Tianjin, is selling 2.88 billion shares at HK$4.75 to HK$4.98. Bohai has roped in nine cornerstone investors, led by Yichang HEC Health Pharmaceutical, to take up $520 million worth of shares, according to its prospectus.

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.

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

The IPO is set to price on July 9, with the shares debuting on the HKEX on July 16. ABC International, CCB International, CLSA and Haitong International are acting as deal sponsors.

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