The Agricultural Bank of China is seeking to raise more than $23 billion through a dual Hong Kong and Shanghai listing, according to documents on Monday, putting it on course for the world's biggest IPO.

The initial public offering by AgBank, founded by Mao Zedong in the 1950s as the central bank's rural arm, had previously been touted as high as $30 billion, but has been scaled back as China's stock markets have dropped by more than a fifth this year and global markets have been spooked by a euro zone debt crisis.

Over the weekend, China's second-largest wind turbine maker, Xinjiang Goldwind Science & Technology Co, pulled its $1.2 billion IPO, the fifth Hong Kong offering to be shelved since last month.

The market downturn has put paid to around $3.8 billion in public offerings on the Hong Kong Stock Exchange in recent weeks.

The Hong Kong portion of the AgBank offering sought to raise up to $14.4 billion -- a figure that includes a 15 percent overallotment set aside for the after-market, according to a term sheet obtained by Reuters on Monday.

The total amount AgBank is looking to raise, including its Shanghai A-share offering and the overallotment, is up to $27.2 billion, based on a prospectus filed to Chinese regulators, which said the Hong Kong offer would be 53 percent of the total deal.

Equity capital markets value an IPO based on the actual offering and not the overallotment, which is not finalized until after the offering first trades.

The previous biggest IPO was the $22 billion raised by Industrial and Commercial Bank of China (ICBC) <1398.HK> in 2006.

Antonny Cheng, managing director at Gain Asset Management Ltd, said he does not expect to invest in AgBank.

It's the weakest among the big four state banks in terms of loan quality, Cheng said, noting there are other high quality companies with cheap valuations at the moment given the fall in China's stock markets.

Supporters of AgBank say it has cleaned up its books and its growth potential is higher than other Chinese lenders.

KEY INVESTORS

Singapore's state investment fund Temasek plans to invest up to $300 million in the IPO, a source with direct knowledge of the matter said on Saturday, and other Middle East and Asian wealth funds are also expected to step in as cornerstone investors.

The Hong Kong H-share offering is set for a July 16 debut, the term sheet said. The institutional portion will be 95 percent, with 5 percent reserved for retail investors.

A separate term sheet distributed by broker CLSA said that retail portion could be increased depending on demand.

AgBank will use the IPO proceeds to strengthen its capital base and support the growth in its business.

AgBank originally pushed for a valuation that would have raised as much as $30 billion, but a drop in China's stock market, coupled with scrutiny of the bank's loan exposure has damped down estimates of the lender's worth.

The Beijing-based bank is best known for its customer base that spreads across China's far-flung parts, though it does have a major presence in most of the country's major cities.

AgBank today boasts nearly 24,000 branches and employs more than 441,000 people, eclipsing ICBC and China Construction Bank <0939.HK>, the world's two biggest banks by market value.

AgBank is China's third largest bank, with $1.4 trillion in assets. It has 320 million customers -- more than the population of the United States.

The bank is run by Xiang Junbo, 53, a scriptwriter and war hero, who previously served top posts in China's central bank and National Audit Office.

(Additional reporting by Fiona Lau and Daisy Ku; Editing by Jonathan Hopfner and Ian Geoghegan)

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