Shanghai-based Haitong Securities, China's second-largest domestic brokerage by registered capital, has won regulatory approval to trade its shares on the Shanghai Stock Exchange, a source said yesterday.

Haitong plans to trade its shares by merging with Shanghai Urban Agro-Business Co Ltd, a Shanghai-listed public company.

A source at the brokerage confirmed yesterday that China Securities Regulatory Commission (CSRC) had approved the company's listing plan and it is likely to finish its listing early next year.

The securities firm currently has 8.7 billion yuan (US$1.1 billion) in registered capital. As a result of its merger with Shanghai Urban Agro-Business Co Ltd, the combined company is likely to have a total of 3 billion shares priced at around 1.06 yuan (13.5 US cents) each, according to earlier reports in the local media. In addition, the combined company will further enlarge its capital with a later private placement, issuing no more than 1 billion shares, reports said.

"The reason Haitong chose to merge with Shanghai Urban Agro-Business Co Ltd is because they are both Shanghai-based and listed companies. It will make it much easier to accomplish the deal," the source said.

The brokerage had earlier planned to merger with Shenzhen-listed Liulu Industrial Co Ltd from Jinzhou, Northeast China's Liaoning Province.

With Haitong giving up Liulu Industrial for Shanghai Urban Agro-Business Co Ltd, Jilin Province-based Northeast Securities instead chose to merge with Liulu Industrial in a bid to seek another brokerage listing.

China's securities regulator yesterday encouraged more of the country's brokerages to become publicly listed, using the equity markets to boost capital and prepare for competition with Wall Street brokers.

"Brokerages with good assets should raise more money to bolster their capital adequacy," CSRC Chairman Shang Fulin yesterday told a Beijing conference organized by People's Bank of China, the nation's central bank.

The Chinese Government is currently restructuring the sector, which has been dogged by a four-year market slump and illegal brokerage operations. The authorities have vowed to halve the number of securities brokerages by the end of the year. A dozen powerful players are expected to emerge in the revived sector.

The restructuring of the industry has helped to strengthen soundly performing brokerages, especially after the government allowed the resumption of IPOs and other capital-raising activities on the domestic stock market, which generated business opportunities for securities brokers.

However, only four of China's more than 100 brokerages are publicly listed Hong Yuan Securities Co, CITIC Securities Co, Shaanxi International Trust and Investments Corp and Anxin Trust & Investment Co.

Shang's comments may spur Hong Kong-traded Shenyin Wanguo Securities Co, Guotai Junan Securities Co and other Chinese brokerages to begin the process of getting listed in Shanghai and Shenzhen.

"The capitalization of the Shanghai and Shenzhen exchanges has risen more than 90 percent this year, with daily trading volume tripling from last year," Shang said.

"The capital market is undergoing a transitional change," and Chinese companies should make use of the opportunity, he said.

(China Daily December 27, 2006)