'Staying away'
"China banks are cheap now, but they'll become even cheaper and probably stay at that level for quite some time as the domestic and global economies worsen," said Leo Gao, who helps oversee about $600 million at APS Asset Management Ltd in Shanghai. "Until the Chinese policymakers lift their tightening hand for a bit, I would stay away from banks."
Gao said he wouldn't participate in ABC's IPO even if the bank prices the shares at 1.3 times price to book.
ICBC, the world's largest by market value, trades at 2.09 times estimated book value for 2010, according to Bloomberg data. Bank of China, the country's third-largest and closet rival of ABC, trades at 1.5 times estimated 2010 book value.
ABC's prospectus didn't give a price range or an amount that the lender would seek to collect. The company may seek to raise as much as $30 billion, Apple Daily reported last month. China's securities regulator said it will review the IPO plan on June 9.
The largest IPO?
The IPO, which may be the world's biggest since ICBC raised $22 billion in 2006, may force ABC to improve corporate governance standards so it can join rivals in tapping capital markets to aid expansion and meet demand for loans.
ICBC, China Construction Bank Corp, Bank of China and BoCom would require at least 1.7 trillion yuan of additional capital to sustain the nation's 8 percent economic growth and meet 15 trillion yuan of loan demand over the next five years, according to estimates from Yang Kaisheng, president of ICBC, in April.
ABC forecasted that its full-year profit to rise to at least 82.9 billion yuan from 65 billion yuan in 2009 in its prospectus. It said without sufficient capital it may not be able to maintain an average 21.7 percent annual loan growth since 2007.
Bloomberg News