SHANGHAI, Oct. 27 — Shares of Industrial and Commercial Bank of China, the country's largest state-owned bank, soared 15 percent on their first day of trading on Friday, in a spectacular debut for the biggest initial offering in history.
After raising about $21 billion from investors, shares began trading heavily in Hong Kong and Shanghai, helping create the world's seventh biggest bank by market value.
The bank's public listing eclipses NTT DoCoMo's $18.4 billion offering in Japan in 1998. The bank's offering is also a fitting symbol of China's dynamic economic growth and its rapid ascent over the last two decades.
The offering is not a first for a big Chinese bank. Two other state-owned banks, China Construction Bank and Bank of China, have also gone public in the last year, raising a combined $20 billion.
Not long ago, the state-owned banks were weighed down by huge debts and considered nearly insolvent. The turnaround came after the Chinese government spent billions of dollars cleaning up the banks in an effort to shore up the country's financial system and transform the banks into global financial powerhouses able to compete with the likes of Citigroup and Bank of America.
Eager to get in on the ground floor and to curry favor with the Chinese government, some of the world's biggest financial institutions, including Bank of America and Goldman Sachs, have paid more than $15 billion over the last three years to acquire minority stakes in China's biggest lenders.
Investors are betting that the banks can thrive in the world's fastest-growing major economy by taking advantage of China's huge pool of savings and by improving their efficiency.
Many of the investors have reaped spectacular gains, though only on paper because most of them have agreed to hold onto their pre-offering shares for at least three years.
Analysts say interest in the Chinese banks has surprised even optimists.
"Chinese bank shares are flying off the shelves like hotcakes," said Jonathan Anderson, the chief Asia economist at UBS. "This is part of the success of China's privatization program."
Goldman Sachs, which agreed to invest about $3 billion for a 6 percent stake in Industrial and Commercial Bank last December, now has a stake worth about $7.4 billion.
The investment banks that underwrote the public offering, including Merrill Lynch and Credit Suisse, stand to make as much as $400 million in combined banking fees, yet another indication that China is starting to play a central role in global banking and finance.
But some experts say the public listing of three of China's biggest state-owned banks will probably not be matched for at least a decade or more by another Chinese company.
Those three banks have recorded the three biggest initial public stock offerings since 2000, and there are few companies left in China that are as big, as highly sought after or as important to the Chinese government.
Still, many analysts remain cautious about the prospects of the big banks, with some arguing that the government has cleaned up the debt but not the management of the banks, which up until a few years ago were best known for corruption, mismanagement and large proportions of nonperforming loans.
Some analysts suspect that hundreds of billions of dollars in bad loans could still be hiding in the system and that a slight economic downturn could prove disastrous for the banks and the banking system.
But for now, investors in China's biggest banks look smart. Investors like UBS, Royal Bank of Scotland, Goldman Sachs, American Express and the Kuwaiti government have made huge returns on their investments by getting cheap pre-offering stakes.
Bank of America, which spent about $3 billion in June 2005 for a 9 percent stake in China Construction Bank, now owns shares valued at about $9 billion.
Shares of five of the Chinese banks that have gone public in the last two years have performed well in Hong Kong, led by the Bank of Communications, whose shares have soared 132 percent since listing in June 2005.
Industrial and Commercial Bank is the biggest bank of them all, with 355,000 employees and about $800 billion in assets.
On the first trading day, the stock jumped 15 percent to close in Hong Kong and Shanghai at the equivalent of 45 American cents, valuing the bank at about $150 billion.
When Industrial and Commercial Bank of China made its initial offering this month by agreeing to sell about 16 percent to the public, people formed long lines in Hong Kong and Shanghai, and the bank received more than $300 billion in orders.
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