One of the enduring symbols of communist China has taken the capitalist road and listed its shares on Hong Kong stock exchange. The Bank of China Hong Kong saw overwhelming interest in its listing but in its first day of trading, the shares fell nearly five percent. Despite the strong demand from investors to buy the shares, on the first day of trading Thursday, Bank of China's stock fell 4.7 percent, or about five U.S. cents. They ended at $1.12.
For decades, the bank in Hong Kong has stood as one of communist China's biggest symbols to the outside world. It is the city's second largest bank.
During China's Cultural Revolution in the 1960's, the Bank of China offices in Hong Kong sported banners covered with anti-capitalist slogans. Slogans blared out from loud speakers at its building, calling on Hong Kong residents to overthrow British colonial rule. The British government responded by blaring Cantonese opera back at the bank.
The operation in Hong Kong is a subsidiary of mainland China's state-run Bank of China. Like many of China's banks, it wants to tap international capital to rebuild its assets after decades of lending to unprofitable state enterprises.
By some estimates, as many as 30 percent of the parent bank's outstanding loans are not being repaid. David Webb, a former financial advisor who runs an organization dedicated to improving the rights of minority shareholders in Asia, said the Bank of China's poor management has been evident for years.
"The parent of this company is the mainland controlled Bank of China which has got numerous problems with its bad loans and has had a number of scandals in the last year, including one involving a sub-branch where $300 million went missing," Mr. Webb said.
Still, retail investors in Hong Kong snapped up all the shares they could. Mr. Webb said small investors are focused on short-term speculative gains.
Other analysts say institutional investors, such as other investment banks and pension funds, bought the shares to curry favor with Beijing and the Bank of China.