Highlights from Bank of China's Mega-IPO

In the world's largest IPO since 2000, Bank of China raised $9.7 billion in Hong Kong this morning. If the overallotment is exercised--as expected--the amount raised will increase to $11.2 billion. Ranked by assets, this is China's second largest bank. Highlights of the deal:

Pricing: Shares priced at 2.95 Hong Kong dollars (38 U.S. cents) each, $HK3 was the high end of the range. Bank of China is selling 25.57 billion shares (10.5% of expanded share capital). Trading is set to begin on June 1st.

Oversubscription: On the retail side, investors demanded 76 times the number of shares being offered; institutional investors demanded 20 times the number of available shares.

What's next? The Industrial and Commercial Bank of China (largest bank by assets) is slated to raised $10 billion later this year.

Comps: Bank of China is now valued at 2.18X forecast 2006 book value; competitors Bank of Communications and China Construction Bank are valued at 2.56X and 2.49X respectively.

Initial feedback on the deal:

UBS Managing Director David Chin (via CNN): "It's pretty much a no-brainer in that most institutions see it as a stock they have to own, and the brand name drives a lot of the non-institutional demand, like corporate, wealth management, and retail".

Kingston Lin, Prudential Bache Securities (via Forbes): "It is safe to set the IPO price slightly below the top end of 3 hkd amid the recent market volatility. As it is priced at 2.95 hkd, it will likely stand at the IPO price or rise slightly to 2.975 hkd on debut trading...I don't expect the bank to post sharp gains in the near term unless the market rebounds sharply and the benchmark index turns back to 16,000 points level."

Yang Liu, China-focused fund manager at Atlantis Investment Management (via Reuters): "It's sentiment towards China. We're in a bull market." (Note: Atlantis didn't buy Bank of China shares.)

Andy Mantel, China Mantou Fund Hong Kong (via MarketWatch): "It's fair..It's cheaper than other listed China banks at the current time."

Christina Fok, China banking analyst for Macquarie Research (via MarketWatch): "Buying China banks is a good way to play the China growth story...the premium for these China banks is going to stay."

Preston Ko, BCom Finance Hong Kong (via Bloomberg): "There's no reason to be downbeat on Chinese banks because their growth always tags along with the economy...I'm not too concerned about short-term price fluctuations caused by the recent global markets slump.''