Haitong Securities Co plans to raise as much as 26 billion yuan (US$3.44 billion) in the biggest share sale by a Chinese brokerage to open branches, hire traders and arrange stock offerings as the nation's equity markets surge.
The company will offer shares to selected institutions, China's second-largest publicly traded brokerage by market value said yesterday. It didn't give a date for the sale. Haitong also plans to boost investment and expand into futures trading.
Haitong's sale may surpass the 25 billion yuan raised by larger rival CITIC Securities Co last week, providing funds to compete in a stock market that's quadrupled in value in the past year. Haitong's market value has swelled to 180 billion yuan, more than that of Bear Stearns Cos, since it gained an exchange listing in June by taking over another company.
"There may be a bubble in the brokerage stocks because valuations are based on the assumption of high trading volume, which won't last for long," said Yi Yangfang, who helps manage about US$5 billion at GF Fund Management Co in Guangzhou.
Haitong's stock has jumped more than fourfold since the takeover of the former Shanghai Urban Agro-Business Co was announced on January 24, and added 12 percent since the regulator approved the transaction on June 8.
The stock sale will almost match the US$3.7 billion Goldman Sachs Group Inc raised in its 1999 offering.
The government is encouraging the nation's biggest brokerages to raise funds, expand and acquire rivals to strengthen the industry before opening the market to global securities firms such as Merrill Lynch &Co and Morgan Stanley.
Beijing-based CITIC Securities raised funds to finance acquisitions and expansion into private equity and derivatives trading. The company's stock has surged more than sixfold this year, propelling it past Nomura Holdings Inc as Asia's biggest brokerage by market capitalization.
Haitong, China's sixth-biggest brokerage by assets, said it would sell 1 billion new shares for at least 13.15 yuan each to no more than 10 institutional investors.