Three leading domestic brokerage houses have applied to the securities regulator to sell bonds following the lifting of restrictions on brokers' financing a month ago.

Shenyin & Wanguo Securities Co Ltd, which submitted its application last Wednesday, said it applied to the China Securities Regulatory Commission to be allowed to sell five-year corporate bonds equivalent to up to 40 percent of its net asset value. The bond is expected to carry an annual yield of no more than 3.9 percent.

Haitong Securities Co Ltd, the country's largest broker in terms of capital, plans to raise roughly 3 billion yuan (US$361.45 million) from the bond sale with an annual yield of up to 3.9 percent.

Guotai Jun'an Securities Co Ltd is expected to net 1.6 billion yuan from floating bonds.

But the three brokers did not say if the bonds are targeted at public or institutional investors.

"On a broad base, securities firms are facing a capital crunch," said Lu Liang, an analyst at China Securities Co Ltd. "Most probably, the money from the bond sales will be used to cover the shortfall in operating capital to help the brokers stay afloat. But who knows what will happen when the bonds mature?"

The CSRC has relaxed the restrictions on brokers, allowing them to sell bonds starting from this month to help the firms.

Domestic securities firms with up to 1 billion yuan in net assets will be allowed to float bonds equivalent to no more than 40 percent of its net asset value, according to the rule.

Buyers of the bonds can be either public investors or institutional investors eligible for a net asset value of 20 million yuan.

(Shanghai Daily October 21, 2003)