CITIC Securities Co, China's biggest publicly traded brokerage, plans to issue 500 million domestic shares in a private placement to institutional investors, becoming the first firm to announce a stock sale after a year-long nationwide ban was lifted.

 

As an arm of top Chinese financial conglomerate CITIC Group, CITIC Securities is expected to raise some 4.2 billion yuan (US$525 million) to fuel further expansion, insiders said. And the price will be at least 8.37 yuan (US$1) a share.

 

"Insurance companies, fund and qualified foreign institutional investors (QFII) will all be our target buyers," said Tan Ning, board secretary of CITIC Securities. "And we welcome strategic investors that are helpful to CITIC Securities' business."

 

Tan said that money raised from the private placement would be used to boost the company's operating capital.

 

"On one hand, the company is going to expand its investment banking business. On the other hand, we would like to strengthen the development of innovative business such as warranties, financial derivatives and non-performing loans disposal," Tan added.

 

Since 2005, CITIC Securities has embarked on a series of mergers and acquisitions. It acquired the securities assets of China Securities and took over a 40.7 percent stake of China Asset Management Co Ltd.

 

Shares of CITIC Securities reached 12.98 yuan (US$1.6) yesterday, a jump of 10 percent on the previous day.

 

The company's net income jumped 11-fold in the first quarter to 94.3 million yuan (US$11.7 million) as domestic stock rallies enticed more investors to buy shares, helping improve margins at Chinese brokerages, which rely on trading for most of their revenue.

 

The China Securities Regulatory Commission (CSRC) issued on Sunday new rules which allow companies to resume capital-raising from Monday after it halted fund-raising on domestic exchanges last year to pave the way for reforms to convert US$250 billion of non-traded shares in listed companies into regular traded stock.

 

Up until April, 70 percent of listed companies had completed the conversion of their non-tradable shares into tradable ones. With the lifting of the ban, securities firms could shift their focus from reforms to the floating of new A shares.

 

Compared to the old rules, companies are now subject to tougher restrictions when selling shares. Share sales should not be bigger than 30 percent of a company's capital before the offering.

 

The new rules also tighten supervision on the management of raised capital and establish standards for private placement before they go public.

 

Currently more than 200 companies out of more than 1,300 listed firms are able to sell shares in the Shanghai and Shenzhen bourses. Around 30 companies have submitted applications to the CSRC to float more shares.

 

China kicked off its securities reform and suspended simultaneously the launch of initial public offering (IPO) and share sales on April 29, 2005.

 

(China Daily May 10, 2006)