MARKETS  STOCKS  IPOS
No First-Day Pop for Postal Savings Bank of China
Shares of the bank, the world’s biggest initial public offering this year, limped out of the starting gate Wednesday

By ALEC MACFARLANE and  ESE ERHERIENE
Sept. 28, 2016 7:40 a.m. ET
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HONG KONG—The world’s biggest initial public offering this year limped out of the starting gate, closing slightly higher with help from the Goldman Sachs Group Inc. traders tapped to support its shares.

Shares in Postal Savings Bank of China Co. rose 0.2% to 4.77 Hong Kong dollars (62 U.S. cents), as investors showed little enthusiasm for China’s sixth-biggest lender after it raised 7.4 billion dollars in the IPO.

The gain mirrored Hong Kong’s benchmark stock index, which also ended 0.2% higher.

Traders at Goldman Sachs bid for shares as others looked to sell. The Wall Street bank had been tapped as the so-called stabilization agent, meaning it was responsible for a smooth first day of trading in Postal Savings Bank’s shares.

“It’s Goldman, Goldman, Goldman everywhere just supporting the share price,” said Ken Wong, an Asian equity portfolio specialist at Eastspring Investments, the 140 billion dollars Asian asset-management arm of U.K. insurer Prudential PLC.
A spokeswoman for Goldman Sachs declined to comment.


The tepid performance comes as many investors panned the IPO for being priced at a premium to other Chinese banks, which trade at a 10% to 30% discount to their book value. The pricing was largely attributable to the Chinese government‘s unwritten rule that new listings of state-owned enterprises should price above book value to ensure state assets aren’t sold on the cheap.

“Institutional investors don’t want to pay for something that’s grossly expensive compared to what you can get in the marketplace,” said Mr. Wong. “When you’re pricing a Chinese bank at one-times book right now, people will just look the other way and buy something else.”

Hong Kong IPOs haven’t delivered the big first-day pop that investors typically expect. First-day gains from new listings in Hong Kong have averaged 1% this year, versus 13% for New York deals, according to a Wall Street Journal analysis of Dealogic data.

While the weak returns have discouraged hedge funds and mutual funds from buying into deals, bankers have been able to pull off some big offerings thanks to support from friendly Chinese backers who agree to buy big chunks of the IPOs ahead of time before the deals even price.

There were a limited number of shares available for trading as the bulk of the IPO—77% of shares sold—was bought by these so-called cornerstone investors, who agree to hold their shares for six months after the IPO.

Established in 2007, Postal Savings Bank is the youngest of China’s large state-owned commercial banks and the country’s biggest lender by branches, with 40,000 outlets spread across China and extending deep into rural areas, mostly in post offices.

“We had expected a dull response for [Postal Savings Bank] and it was because of numerous Chinese banks listed already in the market,” said Ricky Cheung, an analyst at CSC Securities (HK) Ltd. “Investors are cautious on the outlook for the mainland [China] banking industry.”