July 8 (Bloomberg) -- China International Capital Corp., the biggest investment bank in the world's fastest-growing major economy, plans to snub foreign underwriters for the first time in a stock sale to overseas investors.

CICC, one-third owned by Morgan Stanley, will start selling $200 million of stock in late August for Irico Group Corp., said people familiar with the sale. The initial public offering for the Xian-based, state-owned television tube maker will be the first time that CICC leaves out its usual partners, including Morgan Stanley and Goldman Sachs Group Inc., both based in New York.

The Beijing-based firm arranged more than two-thirds of the $46 billion that Chinese companies raised from international investors since 1997. CICC in each sale shared underwriting fees, which totaled $1.2 billion.

``Before, they used to be working with Morgan Stanley, now it seems like they're working a bit more on their own,'' said Michael Donnelly, a senior portfolio manager who oversees $300 million at New York-based American Century Investments. ``They're making efforts to boost their distribution and meeting with investors individually.''

The Irico sale will pay fees of about $7 million, based on the typical 3.5 percent commission on IPOs by Chinese companies in Hong Kong.

``It's a small sale and they shouldn't have any problem,'' said Winson Fong, who oversees $2.4 billion at SG Asset Management Pte. in Singapore.

TV Tubes

Irico produces 10 million color picture tubes for television manufacturers a year, and has had 61.6 billion yuan ($7.4 billion) of sales since 1981, the company said on its Web site. It plans to submit its listing application to the Hong Kong stock exchange this month, the people said.

Feng Danyun, a spokeswoman for CICC, declined to comment. Ma Jinquan, Irico's president, is traveling and couldn't be reached for comment.

CICC, run by Levin Zhu, the 45-year-old son of former Chinese Premier Zhu Rongji, increased the number of global fund managers it works with to about 70 from a dozen in 2002, providing more opportunities to distribute stock overseas. The investment bank's annualized brokerage commissions from secondary trading rose 10 times since 2002, a person familiar with the bank said, without saying how much the bank earned.

CICC handled 11 overseas sales by Chinese companies since 1997, two years after it was formed as a venture between state- owned China Construction Bank and Morgan Stanley.

Morgan Stanley's Help

The biggest was China Unicom Ltd.'s $5.65 billion sale in 2000, underwritten with Morgan Stanley. CICC worked with Citigroup Inc. and Credit Suisse First Boston, both of New York, and Frankfurt-based Deutsche Bank AG on China Life Insurance Co.'s $3.5 billion sale in December. The IPO was the world's biggest in 2003.

CICC also needed help from Morgan Stanley on its smallest transaction, Aluminum Corp. of China's $486 million IPO in December 2001.

Chinese and Hong Kong companies sold $13 billion of shares last year to overseas investors. CICC helped arrange 73 percent of those transactions.

Reducing its dependence on foreign underwriters will mean hiring more salesmen, said Zheng Fang, a money manager at Neon Liberty Capital Management, a New York-based hedge fund.

Nobody answered the phone when Zheng called CICC's Hong Kong office at 4 a.m. three weeks ago to buy shares of Denway Motors Ltd., which makes cars in China with Honda Motor Co. Zheng called the day after CICC analysts recommended the stock and eventually placed the order through a U.S. brokerage instead.

``Understaffed''

``The sales and trading desk is understaffed,'' Zheng said. ``Most of the houses have people on duty 24 hours to pick up the phones and service clients.''

CICC has about 30 analysts covering more than 200 Chinese companies listed in Hong Kong and on the mainland.

``They have access to data in China and they do know the background and mechanics of China's industries,'' said SG's Fong. ``In terms of knowledge enhancement, yes, I benefit at the end of the day.''

Other investors, such as Joseph Levinson, a fund manager of New York-based Halo Group LLC, who helps wealthy mainland Chinese individuals invest in stocks, say the research isn't independent.

``There is no question that CICC has a cozy relationship with the government and there is no way that they'll have independent opinions,'' Levinson said. ``If I relied on their opinions, I'd be bankrupt already.''

The nine-year-old investment bank plans to hire executives from rivals to help sell more shares, the people said. It hired Wang Hao from Salomon Smith Barney in May 2002 as head of sales and trading. Wang declined to comment.

To contact the reporter on this story: Cathy Chan in Hong Kong Kchan14r@bloomberg.net

Last Updated: July 7, 2004 14:03 EDT