China Galaxy Securities closer to 8b yuan IPO
China Galaxy Securities, one of the country’s largest brokerage, edged closer to an A-share initial public offering (IPO) that will likely raise nearly 8 billion yuan (HK$10.08 billion) on the Shanghai Stock Exchange to spearhead a new round of fundraising by Chinese brokerages.
According to the preliminary prospectus published by the Beijing-based firm over the weekend, it would float a combined 1.69 billion A shares, and based on the closing price of its H shares yesterday, the proceeds would top 7.7 billion yuan.
“The publication of the preliminary IPO prospectus means the company would soon go through the review procedure by the regulator,” said Haitong Securities analyst Zhang Qi. “After all, the securities regulator gave the top priority to securities firms’ fundraising demands since they are under its direct oversight.”
It is believed that Galaxy would launch the IPO before March next year and a successful fundraising by the brokerage could pave the way for A-share listings by a clutch of domestic rivals including Shanghai-based Guotai Junan Securities.
It would probably become the largest flotation on the A-share market this year if it were to receive the go-ahead from the China Securities Regulatory Commission before the end of the year.
Beijing resumed the listing market in January following a nearly 15-month hiatus but the regulator is cautious in approving fundraising deals to avoid a fresh equity influx that could dilute the existing holdings in the weak market.
Commission chairman Xiao Gang said only 100 IPOs would come on the Shanghai and Shenzhen markets in the second half of this year.
The Galaxy share sale will be underwritten by Citic Securities and China Securities.
Chinese brokerages are striving to diversify their businesses amid a weak A-share market as incomes from brokerage fees, normally the main revenue source, dwindled.
The regulator has been encouraging the brokerages to strengthen asset management and investment businesses to brave the rough weather.
Through listings, the companies could secure much-needed funds to replenish expansion into alternative investment sectors such as private equity and venture capital.
The benchmark Shanghai Composite Index has been one of the world’s worst-performing indicators since 2010.
Beijing temporarily halted IPOs between October 2012 and December 2013 to bolster investor confidence.
In May 2013, Galaxy netted HK$8.15 billion in a Hong Kong flotation and used more than half of the proceeds to support its margin trading and short-selling businesses.
Last year, it reported net profits of 2.14 billion yuan, up 50.4 per cent from 2012.