CITIC Securities Co, China's biggest publicly traded brokerage, plans to
issue 500 million domestic shares in a private placement to institutional
investors, becoming the first firm to announce a stock sale after a year-long
nationwide ban was lifted.
As an arm of top Chinese financial conglomerate CITIC Group, CITIC Securities
is expected to raise some 4.2 billion yuan (US$525 million) to fuel further
expansion, insiders said. And the price will be at least 8.37 yuan (US$1) a
share.
"Insurance companies, fund and qualified foreign institutional investors
(QFII) will all be our target buyers," said Tan Ning, board secretary of CITIC
Securities. "And we welcome strategic investors that are helpful to CITIC
Securities' business."
Tan said that money raised from the private placement would be used to boost
the company's operating capital.
"On one hand, the company is going to expand its investment banking business.
On the other hand, we would like to strengthen the development of innovative
business such as warranties, financial derivatives and non-performing loans
disposal," Tan added.
Since 2005, CITIC Securities has embarked on a series of mergers and
acquisitions. It acquired the securities assets of China Securities and took
over a 40.7 per cent stake of China Asset Management Co Ltd.
Shares of CITIC Securities reached 12.98 yuan (US$1.6) yesterday, a jump of
10 per cent on the previous day.
The company's net income jumped 11-fold in the first quarter to 94.3 million
yuan (US$11.7 million) as domestic stock rallies enticed more investors to buy
shares, helping improve margins at Chinese brokerages, which rely on trading for
most of their revenue.
The China Securities Regulatory Commission (CSRC) issued on Sunday new rules
which allow companies to resume capital-raising from Monday after it halted
fund-raising on domestic exchanges last year to pave the way for reforms to
convert US$250 billion of non-traded shares in listed companies into regular
traded stock.
Up until April, 70 per cent of listed companies had completed the conversion
of their non-tradable shares into tradable ones. With the lifting of the ban,
securities firms could shift their focus from reforms to the floating of new A
shares.
Compared to the old rules, companies are now subject to tougher restrictions
when selling shares. Share sales should not be bigger than 30 per cent of a
company's capital before the offering.
The new rules also tighten supervision on the management of raised capital
and establish standards for private placement before they go public.
Currently more than 200 companies out of more than 1,300 listed firms are
able to sell shares in the Shanghai and Shenzhen bourses. Around 30 companies
have submitted applications to the CSRC to float more shares.
China kicked off its securities reform and suspended
simultaneously the launch of initial public offering (IPO) and share sales on
April 29, 2005.
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