| HONG KONG
HONG KONG State-owned Postal Savings Bank of China (PSBC) is set to price its Hong Kong initial public offering near the bottom of expectations on tepid demand - although at around $7.6 billion, the deal is still set to be the world's largest in two years.
China's biggest lender by number of branches is now planning to price the IPO between HK$4.76 and HK$4.86 per share, Thomson Reuters publication IFR reported, citing people close to the deal.
It had marketed the 12.1 billion new shares on offer in a range of HK$4.68–$5.18.
PSBC declined to comment on its IPO pricing.
The bank originally sought to raise up to HK$63 billion ($8.1 billion), counting on its network of more than 40,000 branches and low level of non-performing loans to ask for a valuation higher than Chinese rivals.
But many fund managers saw its valuations as too pricey. Its initial marketing range had valued the bank at a price-to-book ratio for 2016 of 0.94 to 1.02 times, far higher than the average of 0.76 for Hong Kong-listed banks.
"The price to book is relatively high," said Jasper Chan, assistant manager of corporate finance at Hong Kong brokerage Phillip Securities, which offers margin loans for retail investors to buy into IPOs in the city.
"Most of the banks are now trading below book, so it's not a good investment in the short term. Longer term, some clients may want to hold it because they think the bank will grow."
Retail investor demand for margin loans to buy into PSBC's IPO totaled HK$83 million through Monday at Phillip Securities.
By comparison, the $18 million listing of contractor Shun Wo Group Holdings Ltd (1591.HK) had HK$5.9 billion worth of margin loans at the brokerage.
PSBC secured orders worth up to $5.86 billion from a group of six cornerstone investors, nearly three-quarters of the total IPO, signaling weak demand from a broad range of institutional investors.
That would put it near the record 77 percent cornerstone tranche for the $810 million listing of China Development Bank Financial Leasing Co Ltd (1606.HK) in July.
Cornerstone investors buy big chunks of IPOs on a preferential basis in exchange for pledging not to sell the shares for at least six months.
(Reporting by Fiona Lau at IFR and Elzio Barreto; Editing by Edwina Gibbs)