Beijing: Agricultural Bank of China has about 350 million reasons why investors might want to buy into what could be the world's largest initial public offering, and construction worker Zhao Qiang is one of them.
Zhao, who moved to Beijing from the eastern Anhui province three years ago, uses the bank to wire part of his monthly income to his parents back home, about 1,100 kilometres away.
"I like Agricultural Bank, it's very convenient," said Zhao, 38, as he and his wife withdrew 200 yuan (Dh106) from their savings account at the lender's branch in Yongding County outside the Chinese capital in May.
Agricultural Bank, which plans an IPO local media have said could raise as much as $30 billion, is less profitable than all its major rivals and more prone to extending loans that default.
Chairman Xiang Junbo is betting investors will overlook those weaknesses because of a different type of asset: its 350 million customers, mainly spread around rural areas that are the focus of a government push to lessen the gap in living standards in the world's fastest-growing major economy.
"For investors who want to have exposure to different segments of the growth in China, it represents a unique stock to hold in a diversified portfolio," said Victoria Mio, a Hong Kong-based senior fund manager at Robeco Group, which oversees $194 billion worldwide. Mio said she plans to subscribe for stock in the IPO if the valuation is "reasonable."
The Hong Kong Stock Exchange is scheduled to hold a listing hearing for the sale on June 10, two people with knowledge of the matter said.
The nation's securities regulator plans to release Agricultural Bank's prospectus. Agricultural Bank Board Secretary Li Zhenjiang wasn't available to comment.
Xiang will still have to persuade investors rattled by Greece's debt crisis, a stock-market slump and a crackdown in China on real-estate speculation to part with cash.
At least 20 companies worldwide postponed or withdrew IPOs in May as the MSCI World Emerging Markets Index slid 9.2 per cent, data compiled by Bloomberg show.
Agricultural Bank will sell shares in Hong Kong and Shanghai. Hong Kong's benchmark Hang Seng Index has dropped 9.6 per cent this year, while the Shanghai Composite Index plunged 22 per cent for the worst performance among the world's 10 biggest equity markets, according to Bloomberg data.
"The domestic market has been hit by the property curbing measures, and the recent plunge in overseas markets will have further negative impact on China," said Deng Yongming, who helps oversee about 2.2 billion yuan at Changsheng Fund Management in Beijing. "For Agricultural Bank, it's really bad timing."
Defying the drop
Chinese IPOs have defied the drop in the wider market this year. Shares of companies that have gone public in Shanghai and Shenzhen gained an average 29 per cent in their first month of trading through June 1, according to data compiled by Bloomberg.
Agricultural Bank's IPO, which may surpass the $22 billion sale by Beijing-based Industrial & Commercial Bank of China in 2006, marks the final chapter of a decade-long overhaul of the country's banking industry.
The government spent an estimated $650 billion to clean out bad loans that were the legacy of years of state-directed lending gone awry.
Set up in 1951 by Mao Zedong to finance rural cooperatives, Agricultural Bank was the first Chinese commercial lender established during Communist rule.
Xiang now plans to delve further into areas left out of the economic transformation that's lifted 300 million Chinese out of poverty in the past three decades according to the United Nations.
