The stock ended at HK8.10 per share, down 4.7 per cent compared with its IPO price of HK8.50. The Hang Seng Index closed down 0.87 per cent to 9,884.78, a nine-month low.

''The initial pricing was on the high side, markets are not friendly, and that?s the result you get,'' said Simon Ho, banking analyst with Macquarie Equities in Hong Kong, who had valued the stock at HK7.50.

The $2.8bn offering by Hong Kong?s second-largest financial group is the first IPO of an arm of one of China?s big four state-owned commercial banks.

And the weak debut contrasts sharply with demand seen before the issue. When Hong Kong billionaire Li Ka-shing was asked this month about plans by his flagship companies to buy into the offer, he said simply: ''We have confidence in BoC.''

The feeling seems to have been contagious. In spite of turmoil in global markets and concern over the mainland government-owned bank?s high levels of bad loans, investors flocked to the IPO in record numbers. The retail tranche was 27 times subscribed and the institutional portion was about 5 times subscribed.

Credit for this must go partly to Mr Li, the territory?s richest tycoon, and the city?s other loyal business magnates. They have consistently backed Chinese privatisations in the past few years, even though these investments often had nothing to do with their core businesses.

The practice has worked well in getting the IPOs off the starting block, but many question what harm it could do to China?s efforts to transform itself into a market economy, and to the corporates themselves.

''This is precisely the antithesis of how a free market is designed to operate,'' said Bill Kaye, senior managing director of The Pacific Group, a hedge fund in Hong Kong. ''I guess it?s kind of a cultural thing. You just can?t let something like Bank of China go out and potentially - even if the risk is low - be a flop.''

The BoC sale marks a high point of corporate support for Chinese listings. Aside from Mr Li?s companies, Hutchison and Cheung Kong, which reportedly were ready to invest US200m in the issue, a further seven companies, mostly Hong Kong property groups, offered a total of about US550m.

Corporate support for Chinese privatisations also often comes from what are touted as foreign strategic investors - London-listed Standard Chartered Bank, for example, is buying US50m of BoC shares. But these, too, often seem to be more financial investments than strategic partnerships.

''It?s guanxi, basically. Curry favour with the right people in China and basically business will be easier for them,'' said one fund manager in Hong Kong, using the Chinese term for building relationships.

Corporates in Hong Kong may also feel bound to do their ''patriotic'' duty for China, said Edmund Harriss, a fund manager with Investec Asset Management. ''

The quid pro quo is that as long as we [Hong Kong] support what the mainland is trying to do, then they will support us during difficult times. The listings will come through Hong Kong and this will remain the favoured market.''

While some corporates, such as Hutchison, may have sophisticated treasury divisions, investors would still prefer them to either spend any spare cash on their real businesses or return it in the form of dividends or share buybacks.

''They are not in the business of buying shares in banks, they are property developers,'' Mr Harriss said of most of the participants in the BoC offering. ''Ultimately the effect is to depress returns.''

The ultimate loser is China, argues Mr Kaye. By seeking to prop up IPOs, it is distorting market principles to achieve policy objectives.

''This clubby system is not helpful in the bigger scheme of things,'' he said. ''China has got to sort out which [economic] model they want to adopt.''

Financial Mail