By Peter Brieger

HONG KONG, Jul 16, 2010 (AFP) - Agricultural Bank of China rose about 1.6 percent at its Hong Kong debut on Friday, in a closely watched dual listing that could become the world's largest share sale.

The lender's shares opened at 3.25 Hong Kong dollars (42 US cents), above the initial public offering price of 3.20 Hong Kong dollars, and touched 3.31 dollars in early trade, before easing to 3.30 mid-morning.

The last of China's "Big Four" state banks to go public could raise a record 22.1 billion US dollars in a mammoth dual offering that opened in Shanghai on Thursday and is seen as a test of investor confidence in China.

AgBank has not yet disclosed whether it will exercise an option to issue additional shares, a crucial factor in determining whether the sale would overtake rival Industrial and Commercial Bank of China's 21.9-billion-dollar IPO in 2006.

The total number of AgBank's shares floated is not yet known and will be determined by its market performance.

AgBank chairman Xiang Junbo told reporters in Hong Kong the floatation was a "historic moment" and described it as "the first step of the internationalisation of AgBank."

He later added, referring to the Hong Kong dollar market price: "I am very satisfied. It's really not too bad -- 3.30 dollars."

A host of heavyweight foreign investors had been drummed up to help make a success of the Hong Kong portion of the sale.

Among those investing were Qatar's sovereign investment fund, British bank Standard Chartered and Hong Kong's richest tycoon, Li Ka-shing.

Francis Lun, general manager of Hong Kong's Fulbright Securities, described AgBank's opening price as "a relief".

"I was relieved it did not fall below the IPO price," he told AFP.

"There has been so much negative publicity that everyone expected (the shares) to tank."

Lun said the boost was partly due to institutional investors scooping up AgBank shares in the secondary market, after many were unable to buy as many as they wanted during the oversubscribed IPO.

AgBank had a lacklustre debut in Shanghai on Thursday with shares closing at 2.70 yuan (40 US cents) -- up 0.75 percent from the IPO price of 2.68 yuan, but lower than the opening price of 2.74.

China is on track to be the world's biggest IPO market this year with up to 300 companies expected to raise 500 billion yuan (close to 74 billion dollars), according to PricewaterhouseCoopers.

The biggest investor in the Shanghai issue was China Life, the nation's biggest life insurer by premium income.

A total of 40 percent of the mainland shares went to 27 so-called cornerstone investors -- mostly state-owned entities ranging from Cofco Ltd, Chinas main grain producer, to China Aerospace Science and Industry Corp to the operators of the Three Gorges Dam.

But AgBank scaled back its original IPO target of nearly 30 billion US dollars amid choppy markets and questions about its balance sheet.

The bank was founded two years after Mao Zedong's 1949 communist revolution with a mission to lend money to China's poor farmers and distribute state money in rural areas.

Heavy exposure to China's poverty-stricken interior meant that mission was frustrated by decades of chaotic policies, leaving it awash with bad debt.

Despite Beijing's efforts to salvage AgBank, it is the weakest of China's big banks and it remains to be seen whether it can shift from policy bank to profit-oriented company.

AgBank's stock market debut came after Fitch credit ratings agency warned of growing risks in China's banking system.

The agency warned in a report that complex deals were obscuring hundreds of billions in loans and possibly concealing a new batch of bad property and infrastructure lending.

pb/njc

Copyright AFP 2010.