Mainland brokerage firm Haitong Securities plans to raise about HK$11.7 billion in a Hong Kong listing next month, despite volatile markets and weak investor sentiment. Its initial public offering would compete with those of jeweller Chow Tai Fook and mainland group New China Life Insurance, which are aiming to raise US$4 billion and US$3 billion, respectively. Haitong's businesses include security brokerage, investment banking, asset management and direct investment, but its profitability has been eroded by tough competition and choppy markets. According to the company's listing document, full-year profit fell to 3.87 billion yuan (HK$4.73 billion) last year from 4.66 billion yuan in 2009. The company expects profit to drop to 3.14 billion yuan this year. It made 2.34 billion yuan profit in the first half. Its key revenue source, security brokerage business, is declining. It accounted for 41 per cent of total revenue in the first nine months, compared with more than 50 per cent in the past three years. Brokerage revenue dropped to 5.77 billion yuan last year from 7.28 billion yuan in 2009. In the first nine months of this year, it totalled 3.3 billion yuan. The fall was due to declining brokerage commission, the listing document said. The commission rate has fallen by more than a third to 0.102 per cent because of intense competition. Volatile markets have also contributed to a slowdown in business. The company also recorded a net investment loss of 303.1 million yuan in proprietary trading in the third quarter of this year, compared with a net gain of 802.7 million yuan during the first half of the year. But Haitong said it intended to expand its proprietary trading and direct investment business as part of its longer-term business strategy to make use of its network and knowledge of the mainland market. The company also wants to expand its investment banking business, which grew to 9.7 per cent of total revenue last year. It plans to improve the profitability of its core business, security brokerage, by introducing new products including margin financing and securities lending. Brokers said the market was unlikely to warm to mainland financial share offerings at this time of the year, especially when mainland financials had underperformed as a whole. Any likely investors would probably pick stocks with track records and were attractively priced, rather than new issues, they said. Larry Jiang, the head of investment strategy at mainland brokerage Guotai Junan International, said it was difficult to determine the outlook for financial stocks, which hinged on new developments in the euro-zone debt crisis and mainland policies. For example, the share prices of China Construction Bank Corp, Industrial and Commercial Bank of China and Bank of China edged up yesterday after days of falls, lifted by signs of monetary easing on the mainland as the government lowered the reserve requirement ratio for selected rural banks. But this could easily be wiped out by any bad news from the euro zone, which had earlier triggered sales of mainland banking stocks, including Construction Bank by Bank of America Corp. 'Any attempt to try to make any sense of it would be stupid,' Jiang said, referring to the performance of mainland banking stocks in the Hong Kong market. 'Everyone has been taking a bet. It was a gamble.' Castor Pang, a research director at Core Pacific-Yamaichi, said the Hong Kong stock market, which was dominated by speculative investors, was sensitive to rumours. Yesterday, warrants and callable bull bear contracts made up 42.4 per cent of the exchange's turnover, a historical high. 'People are more interested in speculating on the stock market than investing in actual stocks,' Pang said.