Acquisition talk sparks rally in CASH Financial and associate Net2Gather
Associate firm also gains after a potential investor is said to be interested in broker
Shares in CASH Financial Services Group, a Hong Kong-based brokerage firm, and its associate Net2Gather (China) Holdings surged yesterday on speculation that a potential investor is interested in acquiring the broker.
CASH Financial gained 43 per cent to close the session at 10.7 Hong Kong cents, its highest level since March this year. The stock jumped as much as 84 per cent in the morning.
Net2Gather, a mobile service provider on the mainland, rallied 38.89 per cent to finish at 7.5 Hong Kong cents, its highest level since July.
A mainland brokerage firm is said to be interested in buying CASH Financial as a way to conduct a back-door listing.
Both firms said in filings with the stock exchange that they were not aware of any reasons for increases in their share prices.
The mainland had a total of 111 brokerage firms as of the end of April, according to the China Securities Regulatory Commission. About 10 of the top firms are listed in Hong Kong.
Mainland brokerages are keen to tap the Hong Kong market to attract more global clients and take advantage of the yuan's globalisation in the financial hub.
CASH Financial and Net2Gather, whose name used to be Celestial Asia Securities, made a joint announcement in July 2010 that a potential investor was interested in buying the financial services business of CASH Financial. No deal was announced afterwards.
Investors have been expecting more mainland companies to acquire small-cap listed firms in Hong Kong to gain access to global investors.
Unlike initial public offerings, which can be postponed to an unlimited date or even scrapped, buying an existing firm is faster and more cost-effective.