Agricultural Bank of China <601288.SS> rose only marginally in the first minutes of its historic debut in Shanghai on Thursday, underscoring the difficult time that may lie ahead for a market that will be asked to absorb more big fundraisings by banks.

AgBank's debut caps off years of planning and preparation, completing its transformation from technical insolvency to a sprawling giant with assets of around $1.2 trillion and a customer base of 320 million -- larger than the population of the United States.

Investors around the country watched AgBank's initial performance closely for signs of whether the beleaguered stock market might find relief after shedding about a fourth of its value so far this year.

The last of China's Big Four lenders to list took a low-key approach, not opening the debut ceremony to foreign media.

AgBank's share performance is being watched closely by investors as a hint of where the market is heading, said Wu Binhua, strategist at Tebon Securities in Shanghai.

A smooth debut and steady rise in AgBank shares would boost investor confidence and may reverse the trend in a market saddled by fears of massive fundraisings by lenders.

A weak performance in its first days of trade could bode ill for upcoming fundraisings by peers including Industrial & Commercial Bank of China (ICBC) <0349.HK><601398.SS> and Bank of China <3988.HK><601988.SS>, who are returning to capital markets to raise tens of billions of dollars after a lending spree last year.

AgBank, which has braved bearish stock markets, is aiming to raise a record $22 billion after exercising an overallotment option, debuts in Hong Kong <1288.HK> on Friday.

AgBank shares rose 1.1 percent to 2.70 yuan ($0.40) in morning trading on Thursday, up from its IPO price of 2.68 yuan. Analysts surveyed by Reuters had expected the stock to gain about 5 percent to 2.81 yuan or less.

The worse-than-expected debut for China's third-largest bank by assets weighed on other banking stocks, pushing China's main stock index <.SSEC> down by 0.8 percent. AgBank has a 5.3 percent weighting in the index, making it the third-biggest component of the index.

The debut bucked the typical trend, registering a much smaller price gain than its rival banks, whose shares jumped up to one-third in their first day of trading in Shanghai.

ICBC shares rose 5 percent on its first day of trading in Shanghai in October 2006, compared with 23 percent for Bank of China also in 2006 and 32 percent for China Construction Bank (CCB) in 2007. After exercising its over-allotment, ICBC raised $21.9 billion, which stands as the world largest IPO to date.

AgBank, now chaired by former soldier and scriptwriter Xiang Junbo, was founded by Mao Zedong in 1951 and now has some 441,000 employees in more than 23,000 branches.

Should the offering show strong demand in the first few weeks, China's third-largest lender will exercise an over-allotment, boosting the $19.3 billion raised last week by nearly $3 billion, making it the largest IPO ever.

Investors have cast doubt over Chinese banks' growth prospects after last year's lending spree weakened their balance sheets and threatened asset quality.

AgBank has said it would grow at a faster pace than its major rivals, reporting on Tuesday a 40 percent jump in first-half net profit.

AgBank, which was technically insolvent just three years ago and had non-performing loans of around 24 percent, sold 22.2 billion yuan-denominated shares in Shanghai at the top of an indicated range. The Hong Kong deal priced in the middle of its original range.

AgBank has sold 40 percent of the Shanghai offering to 27 strategic investors including China Life Insurance <2628.HK> <601628.SS> and China State Construction <601668.SS>. They are subject to lock-up periods of 12-18 months.

China China Construction Bank