Lackluster debut for Bank of China


The Bank of China's skyscraper is one of the symbols of Hong Kong, looming above the Legislative Council

Alex Frew McMillan and reports

HONG KONG, China -- The Bank of China Hong Kong got off to a lackluster start on Thursday, its stock buckling below its offering price.

That was despite heavy buying from its underwriters and as retail investors locked in early gains

Hong Kong's second-largest bank saw its last trade at HK$8.05, down 5.3 percent from its sale price.

The Hong Kong stock exchange records the close as the average of the last five trades, setting it at HK$8.10 -- still a 4.7 percent drop.

The official sale price for the bank was HK$8.50. That's the price that institutions like mutual funds and local companies paid.

A fund manager told CNN on Monday that the Bank of China would be unable to sustain its price because institutional interest was scant (full story).

One lucky punter?

The initial public offering (IPO) is one of the most-watched listings in Hong Kong, the debut of China's foreign-currency flagship.

"Man in the street" retail investors got a 5 percent discount, setting their price at HK$8.08.

With no capital gains in Hong Kong, they lucked out if the found an early buyer. The stock traded as high as HK$8.55, theoretically a gain of 5.5 percent for a quick seller.

But the listing was unable to sustain that level despite heavy backing from underwriter Goldman Sachs.

HSBC trading up

The Bank of China is Hong Kong's second-biggest bank, after HSBC, which ended the morning up 0.59 percent at HK$84.75.

It had sold off heavily the day before on weakness on Wall Street, where investment banks J.P. Morgan collapsed 19 percent and Citigroup plummeted 21 percent.

That suggested Bank of China might struggle. But this is not the most auspicious market timing for the Bank of China's debut in any case.

Chairman Liu Minkang told reporters at the Hong Kong stock exchange that he is confident about the long-term performance of the stock.

Lots of bids from Goldman

But the Bank of China is temporarily getting support from its lead underwriters, UBS Warburg and Goldman Sachs. The bank also underwrote itself (marketing the deal).

"We're seeing a lot of bids from Goldman Sachs, there's a lot of support," Kitty Chan, associate director at Lippo Securities, told Reuters news agency.

U.S. stocks have slumped heavily this year, and Asia has struggled to stave off the same fate. Asian stocks are generally rallying on Thursday (full story). Wall Street enjoyed a heady day on Wednesday (U.S. roundup).

The Bank of China is also the first overseas unit of any of China's "Big Four" banks to sell stock to the public.

China ultimately hopes to take all its banks public, as its bank industry prepares to usher in competition under World Trade Organization rules.