Mainland broker CCS bets on Shanghai through train for Hong Kong listing
Mainland broker hopes to raise HK$1.9b in IPO and is aiming to capitalise on new Shanghai deal
Cash-strapped mainland broker Central China Securities (CCS) is banking on the proposed Hong Kong-Shanghai stock through train as it seeks to raise HK$1.88 billion in a Hong Kong float.
The initial public offering, the fourth listing of a mainland broker in Hong Kong, has already secured US$60 million from two cornerstone investors - one is a firm owned by Cao Junsheng, a former director of Henan-headquartered WH Group.
"A sizeable client base of wealthy individuals in Henan looking to buy Hong Kong-traded shares can generate new revenue for our broking and margin financing businesses," CCS chairman Jian Mingjun said yesterday, adding the upcoming through train scheme allowing cross-trading between Shanghai and Hong Kong exchanges would also allow the company's proprietary unit to make investments in Hong Kong.
But the firm's short-term finances are in dire straits. Its net operating cash flow reverted to the red last year, incurring almost one billion yuan (HK$1.26 billion) in losses as the company ventured into margin financing and securities lending. Cash and cash equivalent dropped by a quarter to 755 million yuan, according to its listing document.
The performance of existing brokerage stocks trading on the local bourse does not bode well for CCS. Citic Securities, which raised US$1.7 billion in 2011, has dropped more than 18 per cent this year, Haitong Securities is down 11 per cent and Galaxy Securities has dropped 23 per cent, according to Dealogic.
A successful listing by CCS would pique interest in listing hopefuls from the mainland's financial sector. GF Securities, which has been building its footprint in Europe by acquiring the London-based commodities trading unit of French bank Natixis last year, is planning a Hong Kong float in a deal that could raise about US$1 billion.
Speaking at an industry forum on Monday in Hong Kong, GF Securities chairman Sun Shuming said the mainland authorities are encouraging business differentiation and specialisation among domestic brokerage firms, creating opportunities for expanding overseas.
Sun also said his company is keen to raise funds in London through US dollar bonds.
About seven mainland brokers are planning to list their shares in the Shanghai market, including Guotai Junan Securities, whose president Chen Geng stepped down last week due to "personal reasons".
