Guosen Surge in China Debut as Citic Plans Stock Sale

Shares of Guosen Securities Co. surged after the brokerage completed China’s largest initial public offering since 2010, as a stock market rally boosted demand for securities firms.

The stock rose as much as 44 percent to 8.40 yuan in Shenzhen trading today after steep gains triggered a temporary halt. State-backed Guosen raised about 7 billion yuan ($1.1 billion) after the China Securities Regulatory Commission resumed approvals for first-time sales by brokerages following a three-year halt.

Chinese brokerages are raising capital as this year’s stock market rally boosted trading income and fees, with the CSRC pledging to further ease curbs, including lowering capital requirements, to promote growth. Shares of industry leader Citic Securities Co. also jumped after announcing plans to sell new equity through a private placement in Hong Kong.

“The timing is good for Guosen,” said Du Changchun, a Shanghai-based analyst at Northeast Securities Co. “Investors are chasing brokerage stocks at the moment although the industry’s valuation is not cheap anymore.”

Guosen is the nation’s seventh-biggest brokerage by assets.

Private Placement

Citic, China’s largest brokerage by market value, plans to sell 1.5 billion shares in Hong Kong to no more than 10 investors, it said in a filing to the Hong Kong Stock Exchange yesterday. The stock gained as much as 12 percent in Hong Kong trading today.

Citic is planning to raise capital after the stock gained 31 percent in Hong Kong this year before the statement. The sale could raise as much as HK$41.6 billion ($5.36 billion) based on Citic’s closing price Dec. 24. About 70 percent of the capital raised will be used to develop capital-intensive operations including margin finance and securities lending, Citic said.

Other Chinese brokerages have announced similar fundraising plans. Haitong Securities Co., China’s second-largest brokerage by market value, said Dec. 21 it plans to raise HK$29.9 billion selling shares in a private placement in Hong Kong. Huatai Securities Co. and GF Securities Co., already listed on domestic exchanges, are planning to sell shares in Hong Kong, the companies said in November.

Domestic IPOs

Guosen’s sale was the largest in China since Ningbo Port Co.’s 7.4 billion yuan offering in September 2010, data compiled by Bloomberg shows. The shares on offer amount to 15 percent of its enlarged capital base of 8.2 billion shares.

China already had 19 publicly traded brokerages. Their shares have risen 160 percent on average this year, data compiled by Bloomberg shows.

Chinese companies raised 84.2 billion yuan through domestic IPOs this year, compared with 98.8 billion yuan in 2012. China had no IPOs in 2013 after the securities regulator halted approvals for first-time sales to prepare new underwriting rules.

— With assistance by Aipeng Soo

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