GS Goldman Sachs Group Inc

HONG KONG—The world's biggest initial public offering this year limped out of the starting gate, managing to close slightly up with help from Goldman Sachs Group Inc. traders tapped to support its shares.

Shares in Postal Savings Bank of China Co. closed up just 0.2% at $4.77 Hong Kong dollars in afternoon trading as investors showed little enthusiasm for China's sixth-biggest lender after it raised $7.4 billion in the IPO.

The slight gain mirrored Hong Kong's benchmark stock index, which also ended 0.2% higher.

Traders at Goldman Sachs Group Inc. bid for shares as others looked to sell. The Wall Street bank had been tapped as the so-called stabilization agent, meaning it was responsible for smooth trading in Postal Savings Bank's shares.

"It's Goldman, Goldman, Goldman everywhere just supporting the share price," said Ken Wong, an Asian equity portfolio specialist at Eastspring Investments, the $140 billion Asian asset management arm of U.K. insurer Prudential PLC.

A spokeswoman for Goldman Sachs declined to comment.

The tepid performance of Postal Savings Bank's shares come as many investors panned the IPO for being priced at a premium to other Chinese banks, which trade at a 10% to 30% discount to their book value. The pricing was largely due to the Chinese government's unwritten rule that new listings of state-owned enterprises should price above book value to ensure state assets aren't sold on the cheap.

"Institutional investors don't want to pay for something that's grossly expensive compared to what you can get in the marketplace," said Eastspring's Mr. Wong. "When you're pricing a Chinese bank at one-times book right now, people will just look the other way and buy something else."

Hong Kong IPOs haven't delivered the big first-day pop that investors typically expect from IPO deals. First-day returns from new listings in Hong Kong have averaged a paltry 1% rise this year versus a 13.2% pop for New York deals, according to a Wall Street Journal analysis of Dealogic data. The first-day pop is meant to compensate investors for locking up funds in the deal.

While those weak returns have discouraged hedge funds and mutual funds from buying into deals, bankers have been able to pull off the big offerings thanks to support from friendly Chinese backers who agree to buy big chunks of the IPOs ahead of time before the deals even price.

There was limited liquidity in the trading of shares as the bulk of the IPO -- 77% of shares sold -- was bought by these so-called cornerstone investors who agree to hold their shares for six months after the IPO.

Established in 2007, Postal Savings Bank is the youngest of China's large state-owned commercial banks and the country's biggest lender by branches, with 40,000 outlets spread across China and extending deep into rural areas, mostly in post offices.

"We had expected a dull response for [Postal Savings Bank] and it was because of numerous Chinese banks listed already in the market," said Ricky Cheung, an analyst at CSC Securities (HK) Ltd. "Investors are cautious on the outlook for the mainland [China] banking industry."

Write to Alec Macfarlane at Alec.Macfarlane@wsj.com and Ese Erheriene at ese.erheriene@wsj.com

(END) Dow Jones Newswires

September 28, 2016 08:25 ET (12:25 GMT)

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