China Merchants Securities, the mainland's No 6 brokerage by market share, is considering raising about US$1 billion in a Hong Kong listing or via a private placement next year, to fund its fast-growing business.
People briefed on the matter told the South China Morning Post that Wang Yan, who was appointed chief executive of Shenzhen-headquartered China Merchants Securities late last year, said at a recent internal staff meeting that he is keen to boost the company's capital significantly.
Raising capital for China Merchants Securities, which has been listed in Shanghai since late 2009, is part of Wang's ambition to transform the brokerage into a stronger rival to other Chinese investment banks such as BOC International.
Before Wang joined the securities company he was chief executive of Hong Kong-headquartered BOC International, the investment banking arm of Bank of China, one of the mainland's 'big four' state lenders.
According to people familiar with Wang's thinking, the new CEO prefers a Hong Kong listing to raising money via a private placement that would mainly be taken up by its existing shareholders, including its parent China Merchants Group.
Initially established in the late Qing dynasty to build warships to fight foreign invaders, the century-old industrial parent also controls China Merchants Bank, the mainland's sixth-largest bank by assets.
'A new boss usually has new ideas and an IPO [initial public offering] in Hong Kong will naturally raise the profile of both the company and the new boss,' said one of the people who declined to be identified because the plan hasn't officially been made public yet.
The final size of any potential Hong Kong IPO hasn't been decided.
But Haitong Securities, the mainland's No 5 brokerage by market share and one of China Merchants Securities' bigger rivals, raised more than US$1.7 billion in a Hong Kong IPO in April. Citic Securities, the mainland's biggest brokerage, listed in Hong Kong last year , but the share-price performance of both firms has been so-so. Like China Merchants Securities, Haitong and Citic Securities were already listed in Shanghai.
A China Merchants Securities spokesperson was not available for comment yesterday.
Earlier this year at an industry seminar in Shenzhen, the China Securities Regulatory Commission, the market watchdog, singled out several mainland firms and asked them to be prepared to participate in some innovative and new types of securities business. Having a strong capital base is key to success for a securities firm that wants to provide a full range of client services, including sales and trading as well as traditional investment banking services such as underwriting equity and debt.
'Wang's vision for [China Merchants Securities] is not only to be a leading brokerage on the mainland but also to become China's 'Goldman Sachs',' said another of the people, referring to the new CEO's concerns about the firm's investment banking business, which lags its rivals in certain areas.
To strengthen its investment banking business, Wang in the past few months has been wooing some of his former colleagues and allies at BOC International to join China Merchants Securities, said the people.
Several senior BOC International staff have agreed to soon join the wholly owned Hong Kong unit of China Merchants Securities, which is a key offshore platform to expand its investment banking services. China Merchants Securities was one of the first mainland securities firms to open an office in Hong Kong.
Currently, China Merchants Securities has nearly 100 retail branches across all major cities on the mainland, making it a household name among individual investors in the domestic stock market.