Bank of China (BOC) shares made a strong debut on the Shanghai Stock Exchange yesterday in the mainland's biggest initial public offering (IPO) to date.

The shares closed at 3.79 yuan (47.4 US cents) on the first day of trading, up 23 per cent from the IPO price of 3.08 yuan (38.5 US cents). They opened at 3.99 yuan (50 US cents).

The rise helped the Shanghai Composite Index close at 1718.56 points, up 2.2 per cent.

Based on the closing price, the bank has a market valuation of 674 billion yuan (US$84 billion), or about 18 per cent of total market capitalization. BOC has now replaced Sinopec as the largest blue chip on the mainland.

"The opening price of 3.99 yuan was beyond my expectation," said She Minhua, an analyst with CITIC China Securities.

Zhang Qi, an analyst with Shanghai-based Haitong Securities, said the price was at the upper end of his estimates.

"The price is 27 times the bank's estimated earnings this year, much higher than the P/E ratio of other domestic listed banks, which is around 11 times," he said, adding that BOC stock is likely to fall in the following weeks.

BOC President Li Lihui forecast the bank's net profit this year to be around 33 billion yuan (US$4.13 billion), compared to 27 billion yuan (US$3.37 billion) last year.

Domestic investors showed great interest in the IPO; and insurers, financial firms and fund managers were among top subscribers.

But other bank shares declined yesterday.

"Bank shares declined because investors shifted their portfolio to BOC shares," said She.

China Merchants Bank, the second-largest Shanghai-listed lender, was down 4.3 per cent to close at 7.56 yuan (94.5 US cents); and Shanghai-based Pudong Development Bank fell 4.54 per cent to close at 9.67 yuan (US$1.21).

BOC was the first major company to list on the domestic market after the government lifted a year-long ban on IPOs in May, and raised 20 billion yuan (US$2.5 billion).

In May, the bank raised US$11.2 billion in Hong Kong in the world's fourth-largest IPO. The shares traded at HK$3.55 yesterday, up 20 per cent from its IPO price.

Source: China Daily