* China's benchmark money market rate hit six-month high
* Everbright IPO dogged by weak sentiment
* Offer priced at the bottom end of the range
* Largest Hong Kong share sale since February
By Michael Flaherty
HONG KONG, Dec 20 China Everbright Bank Co Ltd
fell in its Hong Kong debut on Friday, as renewed
cash crunch fears about China's banking system exacerbated weak
sentiment towards a mid-sized lender that has taken three
attempts to come to market.
Everbright, which raised $3 billion in its IPO, is
the latest in a raft of banks rushing to tap investors to meet
more stringent capital rules, and which have seen profits shrink
and unpaid debts climb amid slower economic growth.
While other China bank IPOs have also been lacklustre,
Everbright's listing has been particularly unsung, with
cornerstone investors accounting for about 60 percent of the
offer - more than double the normal level - as underwriters
sought to lock in as much institutional demand as possible.
Everbright, which is also listed in Shanghai, also had the
misfortune to debut amid a spike in interbank rates. China's
benchmark money market rate climbed to a six-month high on
Friday despite attempts by the central bank to calm sentiment,
with signs of a scramble for cash reminiscent of a massive
crunch that occurred in June.
Although China stock markets have shown a more measured
response than in June, some anxiety has set in and shares in
Everbright dropped to HK$3.87, or 3 percent below its IPO price,
which was near the bottom of its indicated range.
"It's not particularly cheap," said Cong Li, managing
partner at Hong Kong-based hedge fund Zenas Capital Management.
"Financial names are under pressure because the inter-bank
rates went up quite a lot recently in China" he said. Li invests
in Chinese stocks but is not an Everbright Bank shareholder.
Other recent listings such as Huishang Bank Corp Ltd
and Bank of Chongqing trade near or below
their listing price.
After an initial surge of as much as 40 percent, China Cinda
Asset Management Co Ltd, a bad loan management firm,
has also given up some of its gains. The Hang Seng H Financial
Index is down about 1 percent this year.
Everbright is among the mid-sized banks in China that have a
relatively low amount of reserve cash on hand, as the lenders
are dwarfed by the country's Big Four banks and, as a result,
are more aggressive in the loans they extend.
Its Tier 1 risk-adjusted capital ratio - a measure of the
strength of bank balance sheets - was 7.89 percent as of
September 2013, significantly below the industry median of 12.03
percent, according to data compiled by Thomson Reuters.
The new rush to tap investors comes after Chinese lenders in
2010 raised $82 billion as a surging stock market helped them
replenish cash after a post-financial crisis lending binge,
according to data from Thomson Reuters.
Everbright received commitments worth $1.74 billion from 19
cornerstone investors including a massive $800 million from
China Shipping (Group) Co, according to its
prospectus released this month.
The uptake of these investors resulted in a much lower
percentage of publicly floated shares - requiring special
permission from Hong Kong regulators.
The Everbright Bank IPO is Hong Kong's biggest share sale
since China Petroleum & Chemical Corp (Sinopec)
, Asia's largest refiner, raised $3.1 billion in
It failed in two previous attempts to list in Hong Kong, hit
by market volatility around the time of the process. It had
hoped in 2011 to raise $6 billion through a Hong Kong deal.
China Everbright Securities, China International Capital
Corp, Morgan Stanley and UBS AG were the lead
coordinators of the offering.