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SCMP Reporter

Brokerage unit aims to go round profit record for quick entry to A-share market

China Everbright, a locally listed financial services and investment holding company, said its mainland brokerage arm is seeking a domestic listing in the A-share market.

Under the plan, Everbright Securities, of which China Everbright owns 46.66 per cent, will float its shares through a  backdoor listing.

Unlike an initial public offering, a backdoor listing would not raise any funds.

Everbright Securities will have to buy a controlling stake in an existing A-share listed firm for asset injection.

A China Everbright official said the backdoor listing was aimed  at skirting the mainland's listing requirement of three consecutive years of profit and to bring the brokerage unit to the market as early as possible.

'Everbright Securities won't be going public until 2008 if its listing is by an initial public offering,' said China Everbright company secretary Richard Tang Chi-chun.

'While the China Securities Regulatory Commission has been encouraging local brokerage firms to shore up their capital base through the capital market, Everbright Securities can raise funds in the secondary market to satisfy its future funding needs,' Mr Tang said.

Everbright Securities said it had already looked into more than one A-share company as a potential 'shell company' for the backdoor listing but was yet to disclose its final target and timetable, Mr Tang said.

The mainland media reported that its acquisition target was Shanghai-listed textile products maker Zhejiang China Light & Textile Industrial City Group.

Everbright Securities' board has authorised its management team to start preparatory work on the listing plan, including negotiations with its target shell companies and communications with the relevant regulatory authorities, according to Mr Tang.

Set up in 1996, Everbright Securities was the eighth-largest brokerage by trading turnover last year.

The company, which has 47 branch offices in 19 provinces nationwide, accounted for a market share of 2.57 per cent  at the end of last year.

The brokerage reported after-tax profit of 60.8 million yuan  last year, compared  with a loss of 216 million yuan in 2004, according to China Everbright's annual report.

Its total assets grew 16 per cent year on year at 3.24 billion yuan  at the end of  last year.

The mainland's stock markets were the world's best performers among major exchanges so far this year, a dramatic reversal after four  years of finishing last.

The benchmark Shanghai Composite Index has soared 43.49 per cent to date, while the Shenzhen Composite Index shot up 53.94 per cent.

The bull run in the country's domestic A-share market has provided a huge boost for the struggling brokerage industry, which has been plagued by corruption, incompetence and plummeting stock prices in recent years.

In an effort to provide further support to brokerages and the market, the central government will allow margin trading next month and could also change the current rules to allow same-day trading.

Shares of China Everbright closed at   $4.71 yesterday.



China Everbright arm plans backdoor listing