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Odd Man Out: ABC is about to go public

SHARES IN Hong Kong took another dive today, with the benchmark Hang Seng Index shedding 2.07% to finish at 19,371.54, tracking selloffs in the US and Europe late last week.

Meanwhile, the Shanghai Composite Index lost 1.64% to close at 2,511.73, driven lower by liquidity concerns prior to two major issues.


This follows a 3.8% loss last week for the benchmark index which tracks A shares in the PRC.

A motley assortment of jitters combined to drag local bourses lower.

Continued anxiety over the mushrooming sovereign debt repayment crisis in the EU is a major concern.

The two markets also tracked major selloffs on Friday in the US on worse than expected employment numbers.

But chief among immediate concerns in both Hong Kong and China was the impact of Agricultural Bank of China’s announcement late Friday that it intends to issue as many as 47.6 bln new shares in both Shanghai and Hong Kong, which clearly has the potential to become the largest IPO ever, anywhere.

This had an obvious numbing effect on investors in regional bourses worried that the new listing, the only non-listed lender of China’s “Big Four State-owned Banks,” would seriously limit liquidity in the markets into the indeterminate future.

ABC was not the only financial institution causing jitters on the markets as Bank of Communications (BoCom), China's No.5 lender, yesterday set a 1.5-to-10 rights issue for its Shanghai- and Hong Kong-listed shares, intending to raise some 33.07 bln yuan.

The combined effect was the benchmark index for Chinese shares closing at a 13-month low.

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The Shanghai Composite Index has lost 23% of its value this year, with most of the downside bubbling up on concerns over either an outright property bubble burst or aggressive implementation of macromeasures meant to cool the fast-growing sector.

Analysts also point out that weaker than expected recoveries in the EU or North America put more pressure on China to find ways to maintain growth levels by tapping domestic consumption rather than traditional overreliance on external demand.

Following news of its watered-down fundraising campaign, BoCom led the retreat among listed lenders, shedding 3.3% to 6.18 yuan after it downsized its original rights offer plan by 20%, which led ABC to announce it would sell a 15% equity stake.

Commodities counters trended lower on weaker metal and cement outlooks, partly due to concerns that China’s 4.5 trln yuan domestic stimulus package would soon run its course and leave construction in the lurch.

China’s top aluminum firm Aluminum Corp of China Ltd (Chalco) as well as Jiangxi Copper both lost around 1%.

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Bank fundraising finally replaced property concerns as the chief bourse drag today

The country’s largest listed property developer, China Vanke, was the biggest decliner in the real estate sector today after announcing sales last month slid by 20%.

According to a submission on the bourse watchdog’s website, Agricultural Bank of China, the nation’s biggest lender by customers, plans to sell 22.24 bln shares in Shanghai and 25.41 bln shares in Hong Kong, excluding an over-allotment option.

Details of ABC’s IPO plans dragged lending peers lower on market liquidity anxiety.

China’s biggest lender Industrial & Commercial Bank of China Ltd fell 2.4% to 4.12 yuan, while China Merchants Bank Co shed 2.9% to 12.80 yuan.

See earlier related story: CHINA SHARES: Index loses 2.4%, May selloff hits 10%

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