China Construction Bank Shares Jump on Shanghai Debut

Sept. 25 (Bloomberg) -- China Construction Bank Corp. became the world's third-largest bank by market value, overtaking Bank of America Corp., after the Chinese lender's shares surged on the first day of trading in Shanghai.

The stock rose as much as 40 percent, and was trading 35 percent higher at 8.72 yuan at 9:56 a.m., giving the Beijing- based bank a value of $226.9 billion. Construction Bank, which has traded in Hong Kong since October 2005, raised 58 billion yuan ($7.7 billion) selling shares at 6.45 yuan apiece this month in the world's second-largest share sale of the year.

The surge means China has two of the world's three largest banks by market value, less than four years after the government spent $150 billion bailing out the industry. Since then, economic growth averaging more than 10 percent has spurred banking profits, while China's stock index quadrupled in the past year to be the world's most expensive relative to earnings.

``Investors know this is irrational and can't last forever, but as long as China's growth engine keeps roaring, banks will churn out great results and everything seems justified,'' said Wang Xu, a bank analyst at China Universal Asset Management Co. in Shanghai, which owns 6.5 billion Construction Bank shares. ``How deep China's bank reform has gone will be manifested in an economic downturn.''

Bank of America's market value is $224.5 billion, while Citigroup Inc.'s is 231.8 billion. Industrial & Commercial Bank of China Co.'s is $278.6 billion.