Kuwait to invest $800m in Chinese bank's IPO

Agricultural Bank of China (AgBank) has received an $800 million (Dh2.93 billion) investment from the Kuwait Investment Authority, sources said yesterday, in a deal that means Middle East funds will take up more than half of Hong Kong's cornerstone portion of AgBank's $23bn IPO.

The sources confirmed a report issued late on Sunday that the Qatar Investment Authority had agreed to invest $2.8bn in AgBank, a greater-than-expected amount that gets underwriters closer to its goal of raising about $6bn through cornerstone investors.

Excluding over-allotment shares, AgBank hopes to raise around $12bn through its Hong Kong offering, and around $11bn through Shanghai. Non-Chinese investors are forbidden from taking part in China IPOs. AgBank hopes to surpass Industrial and Commercial Bank of China (ICBC), which raised $21.9bn in 2006, as the largest-ever IPO.

China's market drop since April has forced the lender to scale back its fundraising plans from the $30bn it hoped to haul in.

China Resources Enterprise's parent company also committed to invest $200m in AgBank's IPO, a source familiar with the matter said yesterday.

Cornerstone investors agree to buy into an IPO before it prices. They are normally locked in for six to 12 months and help establish confidence in the offering before it is marketed to institutional investors.

The investors' names should appear in the Hong Kong offer red-herring document due this week, the sources said. Other cornerstone investors include Temasek Holdings, Standard Chartered, Rabobank and Hong Kong tycoon Li Ka Shing, whose commitments range from $100m to $500m each.