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By Jason Simpkins
China Construction Bank Corp. is gearing up for what is likely to be the world's second biggest public stock offering this year. The amount the bank expects to raise was not disclosed in the preliminary prospectus released Tuesday. But based on current share prices it's estimated that the stock offering could raise between $7.5 billion and $8 billion.
China Construction Bank is China's second largest moneylender and, according to the prospectus, it has $810 billion in assets. It is often tapped for the funding of infrastructure improvements such as roads, bridges and dams. It is also the country's largest mortgage and real estate lender – providing 22% of China's mortgages and 13% of its overall loans. The bank plans to offer up a total of 9 billion Class A shares.
China Citic Bank, the eighth largest Chinese bank, first set the bar earlier this year, bringing in a reported $5.4 billion from a stock offering. It sold 2.3 billion new Yuan-denominated shares in Shanghai at 5.8 Yuan each, and another 4.89 billion shares in Hong Kong at 5.86 Hong Kong dollars per share.
With this additional capital, financial institutions can increase their lending to fuel China's economic expansion, while at the same time extracting some liquidity from the economy. Massive stock offerings have been repeatedly encouraged by Beijing as a means of satisfying investor demand and providing more reliable ‘blue-chip' investment opportunities.
Also, according to MarketWatch.com, Chinese city commercial lender Bank of Beijing Co., said Monday that the subscription period for its initial public offering of $1.2 billion Class A shares would be from Sept. 10 to Sept. 11. The bank is set to become the third domestically listed city lender when it starts trading on the Shanghai Stock Exchange around Sept. 19. It will also be the latest Chinese firm to put aside plans for a Hong Kong IPO.
Reportedly, the Bank of Beijing originally planned to launch a Hong Kong IPO in the first half of 2007. But the bank has postponed its Hong Kong listing as Chinese regulators continue steering high-quality local companies to the Shanghai and Shenzhen exchanges, hoping to meet the rapidly growing demand in the countrys market and sandbag it with larger, less-speculative investment opportunities.
More IPOs of this kind are anticipated throughout the remainder of the year. The 41 IPOs that took place on the Shanghai and Shenzhen exchanges in the first half of 2007 raised about $17.28 billion. In all of 2006, $21.62 billion was raised.