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Everbright interest in brokerage cut to 33pc

Carol Chan

CSRC refuses to exempt red chip from foreign holding rule on securities firms

Red chip China Everbright's stake in Everbright Securities will be diluted to 33 per cent this year as the mainland regulator has refused to exempt the companies from a rule that caps foreign ownership in a local securities firm at that level, sources said.

China Everbright's stake in the brokerage, which is planning an initial public offering in Shanghai this year, would be diluted to 39 per cent after a reduced private share placement in April, a source said.

It would be further reduced to 33 per cent this year or early next year on completion of the share sale.

China Everbright, a Hong Kong-listed financial services group that now owns 46.6 per cent of the Shanghai-based brokerage, is considered a foreign company because it is registered in Hong Kong.

Its parent company, China Everbright Group, is wholly owned by the state.

'It's a historical problem as we bought the stake [in Everbright Securities] before the China Securities Regulatory Commission released the relevant regulation,' a senior China Everbright executive said.

China Everbright and Everbright Securities management met CSRC officials last month to discuss and clarify the issue.

The red chip had expressed its wish to maintain a stake higher than the official cap even after Everbright Securities goes public but the commission rejected the proposal.

Everbright Securities, in preparation for its listing, initially planned to boost its capital base by 1.2 billion yuan through a private placement of 461 million shares at a tentative price of 2.64 yuan each.

It would now have to scale back the size of its share sale as China Everbright would not participate in the placement, sources said without giving the new fund-raising target.

The brokerage, which has registered capital of 2.45 billion yuan, reported an operating profit of 1.23 billion yuan last year on 2.09 billion yuan turnover, according to mainland media.

Meanwhile, the sources said a planned 20 billion yuan government-led bailout of China Everbright Bank was still caught in a 'tug-of-war' between Central Huijin Investment and Everbright Group and no concrete timetable or details would be released.

Everbright Group chairman Wang Mingquan was lobbying Beijing to let Huijin inject the money into the parent firm instead of directly into the bank, the country's eighth-largest lender, as that way the group could avoid losing a controlling stake and a major reshuffle of the top management at the bank, sources said.

'From day one, we have expressed our suggestion but it still depends on the cabinet's decision,' he said.

Huijin, the central bank's investment arm, favours a direct injection into Everbright Bank.

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