Haitong seeks HK listing in overseas push

PUBLISHED : Wednesday, 27 April, 2011, 12:00am
UPDATED : Wednesday, 27 April, 2011, 12:00am


Haitong Securities yesterday became the second mainland brokerage to seek a listing in Hong Kong, joining its bigger rival Citic Securities to raise the international profile of mainland securities firms.

The Shanghai-based brokerage said it would sell up to 15 per cent of its enlarged capital, or 1.2 billion shares, in a listing to raise as much as HK$14 billion, based on its A-share price of 9.76 yuan (HK$11.62).

The H-share initial public offering plan comes a month after Citic, the nation's largest brokerage, announced it would raise about US$2.7 billion in Hong Kong.

Mainland brokerages are eager to expand overseas as China's financial clout grows and the country attempts to 'internationalise' the yuan.

The two mainland brokerages raked in handsome profits in the past years, largely because of high turnover on the volatile stock markets.

Haitong earned 3.7 billion yuan last year, although the profit was down 19 per cent from 2009. Net profit in the first quarter rose 17 per cent from a year earlier to 1.19 billion yuan.

'The Hong Kong listing plans are a clear signal that mainland brokerages want to expand abroad,' said Chen Xuebin, a professor of finance at Fudan University. 'They will first hone their image as global competitors through a Hong Kong IPO and then use the proceeds to expand businesses.'

According to Bloomberg, Lin Yong, the incoming chief executive of Haitong International Securities Group, a Hong Kong subsidiary of the mainland brokerage, aims to lure top investment bankers away from their US and European employers by paying 'what's needed' to attract them.

Haitong bought Taifook Securities Group for HK$1.82 billion in 2009 and created Haitong International.

International investment banks played a leading role in managing the overseas public share offerings of mainland state-owned companies in the past two decades.

But the Chinese rivals are eyeing an increasing share of the lucrative business amid the country's high-profile 'go outbound' campaign.

On the mainland, the highly profitable secondary market business is still off-limits to foreign companies, which cannot offer brokerage services and collect trading fees. Foreign investors are allowed only to form joint-venture investment banks with local partners to underwrite A-share offerings.

Protecting local companies has helped home-grown players such as Citic and Haitong make large profits which can be used for overseas expansion. But analysts say it will take time for mainland companies to gain the experience and acquire the talent to compete with their foreign rivals.