New | China Galaxy Securities to raise HK$23.9 billion in new share issue

China Galaxy Securities, one of the country’s biggest brokerages, has raised net proceeds of HK$23.9 billion by issuing 2 billion new shares to no more than six investors at a time when the Hong Kong and Shanghai markets have rallied to 7-year highs.

The mainland brokerage’s fund-raising plan is taking after its shares surged almost 170 per cent in the past year. In a filing with the Hong Kong stock exchange on Tuesday, its chairman Chen Youan said the shares were placed at HK$11.99 apiece, representing a 5.74 discount to the closing price of HK$12.74 on Monday.

It says 60 per cent of the proceeds will be used for margin financing and securities lending, while the other 15 per cent will be used for capital-based intermediary business.

Besides the speed, doing a share placement to a handful of large investors can help a listed company escape hefty tax payments - 10 per cent of the entire amount of capital raised in the share sale - to the mainland’s National Social Security Fund if they manage to sell the shares to 10 investors or less.

In Ping An’s US$4.8 billion share sale last year, it saved up to HK$3.7 billion, twice the average size of an initial public offering in Asia.

Ample liquidity in the market can also play an important factor in a sizeable share placement. Stock turnover in Hong Kong has surpassed the United States for the first time, with a daily record of HK$293.9 billion on April 9.