Ping An Securities becomes the latest mainland brokerage seeking to tap Hong Kong’s equity market
As the mainland continues to call time out on new IPOs, mainland securities firms will continue to look towards fund raising in Hong Kong, analysts say
Ping An Securities, the brokerage arm of China’s second-largest insurer, is the latest of a string of mainland securities companies seeking to list in Hong Kong in an effort to raise funds and boost their international exposure.
Ping An Securities and other mainland brokerages are looking to Hong Kong in spite of the weak market performance this year as the primary listing channels on the mainland have effectively been shut.
“The mainland has suspended IPO approvals in recent months and there are long queues of mainland companies waiting for a listing. The simple solution for these listing hopefuls is to have an IPO in Hong Kong,” said Benny Mau, chairman of Hong Kong Securities Association.
“Besides Ping An Securities, there are currently several mainland securities firms also planning to have IPOs in Hong Kong in the following months,” Mau said.
On the mainland, the China Securities Regulatory Commission controls the pace of new listings and has imposed suspensions eight times in the past two decades during periods of depressed markets or in response to market malpractices.
Ping An Insurance said in a notice to the Hong Kong Exchanges and Clearing and the Shanghai Stock Exchange on Thursday that its board had approved a plan for the securities unit to seek an H-share listing after being reincorporated as a joint stock company.
The H-share issue will not be more than 25 per cent of the total stock, with a 15 per cent over-allotment option. The date and price of the issue are to be decided later.
Ping An said the funds raised will be used to increase Ping An Securities’ capital funds, supplement its working capital and support its business development.
This will be the first time for Ping An Insurance, which is dually listed in Hong Kong and Shanghai, to spin off its business for an initial public offer in Hong Kong.
Ping An Insurance shares closed 1.19 per cent lower at HK$33.35 on Thursday while the Hang Seng Index closed down 2.1 per cent.
Brokerage firms including Huatai Securities, which raised US$5 billion, and GF Securities which raised US$4.13 billion, were among the large IPOs last year that helped Hong Kong to become the top market for new listings worldwide last year, beating out New York and London.
In the first quarter of this year, Hong Kong remain the top IPO market worldwide, but the amount of funds raised was the lowest in a decade due to the fact that most of the IPOs were small in scale, according to Thomson Reuters data.
Jeffrey Chan Lap-tak from Oriental Patron Financial Group, believes the Ping An Securities IPO will be sizeable.
“This may not be the best timing. However, for a good quality company with a big brand, it should still be able to attract investors,” Chan said.
Ken Wong, Asia equity portfolio specialist at Eastspring Investments said Ping An Securities and other mainland brokerages would like to list in Hong Kong as a way to raise their international exposure.
“The proposed IPO would help raise the public awareness of Ping An Securities while also trying to unlock more value for current Ping An Insurance shareholders,” Wong said.
Wong said if these companies list at a lower IPO valuation relative to their peers, then there will be some interest in these new issuances.
Chinese brokers here in Hong Kong on average are currently trading at around 1.1 times book value, Wong said.
