BEIJING -- In one of the most hyped, superlative-laden China deals in recent memory, shares of Industrial & Commercial Bank of China climbed 15% in their first day of trading in Hong Kong Friday.

The bank raised about $19.1 billion in the offering, the largest IPO in history. In a simultaneous Shanghai listing on Friday, ICBC shares also gained.

The warm reception was the latest in a string of such Chinese listings.

In the U.S., shares of budget hotel operator Home Inns & Hotels ( HMIN) closed up 63% in their first day of trading Thursday.

Recent debuts from Mindray Medical ( MR) and New Oriental Education & Technology Group ( EDU) have also been well-received.

But even as China bets go, ICBC has won an extra degree of attention as the biggest bank in the world's most populous country.

At year-end 2005, ICBC held $726 billion in deposits, equivalent to 19% of all China's bank deposits.

It has more than 2.5 million corporate customers, and personal customers exceed 150 million.

Edmund Harriss, manager of the Guinness Atkinson China and Hong Kong ( ICHKX) fund, says he bought shares because he expected to see a mild pop on the IPO.

However, he remains "somewhat cautious" on the financial sector and isn't sure if he'll buy more.

"This is very much a proxy on the banking sector in China," Harriss says. "I'm OK about having some in my portfolio, but I would be unlikely to chase it."

Harriss also believes Chinese banks aren't cheap.

"The valuations we are seeing are based on a growth profile that is undoubtedly there, but takes no account of any slips or speed bumps along the way," Harriss says. "If we find that nonperforming loans pick up, one needs to be aware that these banks are expensive relative to their peers in the region."

He isn't the only skeptical investor.

A buy-side analyst at one Chinese fund concern said he had advised the firm's portfolio managers not to buy too much of ICBC's shares.

He declined to be quoted by name, because he said some money managers at his firm may disagree with his opinion.

"It's big, but that doesn't mean it's good," says the analyst.

Following ICBC's run-up in its debut, the analyst pointed out that its shares were trading at about 2.5 times book value, based on Hong Kong prices.

That looks expensive, given that China bank stocks in the mainland market typically change hands for just above 2 times book value.

"I believe the IPO price is too high. I would prefer a cheaper stock that could deliver similar or stronger earnings growth," says the analyst. "If you look at the financials of other Chinese banks, they have similar or stronger fee-based income growth."

ICBC, which was set up in 1984 to take over the central bank's commercial banking portfolio, has a reputation in China for poor service, although many Chinese like its vast and convenient ATM network.

On the growth side, ICBC is hoping to boost its fee-based business by selling insurance and other investment products to a growing base of affluent customers.

Fee and commission income has jumped sharply, showing compound annual growth of 37% between 2003 and 2005.

Qiang Liao, a Standard & Poor's analyst in Beijing, notes that ICBC, along with other Chinese banks, is still "at an early stage in terms of fee collecting."

Until recently, it was rare for Chinese banks to charge retail customers for many services.

For advice on its push into the fee business, ICBC can turn to a seasoned group of strategic investors that includes Goldman Sachs ( GS), Allianz ( AZ) and American Express ( AXP). The trio bought a 10% stake in ICBC in April 2006.

ICBC has cast itself as being well-positioned to profit from China's increasingly prosperous middle class.

The bank says that of its 16 million customers with assets greater than $6,300 (50,000 yuan), the average asset balance stood at more than $19,000.

However, that means the vast majority of ICBC's customers -- 134 million -- still have balances less than $6,300, the buy-side analyst notes. "So I don't believe ICBC can make money on this customer base," he says.

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