Haitong delays its $1.7b offering in HK

Updated: 2011-12-13 15:08

By Elzio Barreto and Denny Thomas (China Daily)

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The firm will relaunch the IPO in the first quarter of next year

HONG KONG - Haitong Securities Co Ltd, China's No 2 brokerage by assets, has pulled its up to $1.7 billion Hong Kong stock offering because of poor market conditions, sources said on Monday. The news is the latest blow for new listings in Asia's once booming IPO center.

The company was set to price the offering on Monday after last week's market roil delayed the pricing on Friday. Instead, the company decided not to pursue the offer and will relaunch it in the first quarter of next year, depending on market conditions, according to two of the three sources who confirmed the decision to Reuters.

"People are very cautious about their investments coming into the end of the year," said Ronald Wang, managing director of China Merchant Securities Co Ltd. "They will be picky about the choices they make," he added.

The fact that Haitong was not the first securities company to raise funds in Hong Kong this year did not help matters either, said Wang. In September, China's biggest listed brokerage, CITIC Securities Co Ltd, raised $1.7 billion and the stock tumbled 10.5 percent on its first day.

"Most of the issuers will face a tough year in 2012 as the conditions next year are not going to be any better than this year," Wang added.

The sources had direct knowledge about the matter but were not authorized to speak about it on the record. Haitong Securities' investor relations executives also declined comment.

"Haitong doesn't have a huge urgency for funds right now and hence can afford to wait for the market to improve," said Core Pacific's senior analyst Timothy Li.

Hong Kong, the world's busiest IPO market for the past two years, has seen a year-end rush for deals after the eurozone debt crisis virtually shut the IPO market in the second half.

At least five more Hong Kong deals totaling about $1.5 billion are slated to be priced before the end of the year, according to IFR estimates. Haitong's decision to postpone its offer could cast doubt over the fate of some deals, said bankers.

Haitong's offer was backed by the global private equity firm Warburg Pincus LLC, which had committed $210 million to the offer. It is rare for large IPOs backed by cornerstone investors to be pulled.

Haitong was aiming to sell 1.229 billion new shares at between HK$9.38 ($1.20) and HK$10.58 each.

Founded in 1988, the company has 210 branches in 113 cities in the Chinese mainland, with 13 more in Hong Kong and Macao and more than 4 million retail brokerage customers.