China Galaxy Securities Plans $2.3 Billion Stock Sale

China Galaxy Securities Co. said it plans to sell about $2.3 billion of shares in Hong Kong to help fund loans to equity traders even after the stock-market regulator tightened oversight of such financing.

The broker will sell as many as 2 billion new shares in a private placement, it told Hong Kong’s stock exchange Tuesday. The stock, valued at about $2.3 billion based on its last close, will be priced at as much as a 20 percent discount to the five-day average close before the sale.

The securities regulator on Friday banned Citic Securities Co., the nation’s top brokerage by market value, and its two closest rivals from adding new margin loan accounts for three months following rule violations. The Shanghai Composite Index fell the most in six years on Monday on fears that curbs on lending would derail a rally that’s added $1.6 trillion to the value of Chinese shares in six months.

Galaxy Securities shares fell 2.4 percent at 9:35 a.m. in Hong Kong, bucking the 0.3 percent rise in the benchmark Hang Seng Index. It will use about 60 percent of the proceeds of the sale for its margin finance, securities lending and stock repurchasing businesses, according to Tuesday’s filing.

Citic Securities said this week it will press ahead with a plan to sell as many as 1.5 billion shares in Hong Kong through a private placement. Second-ranked Haitong Securities Co., which has been planning a HK$29.9 billion ($3.9 billion) share sale in Hong Kong, said it sees no significant impact on its operations from the suspension of new margin accounts.

The China Securities Regulatory Commission said this week that it isn’t trying to curb equity trading and its actions were “to protect investors’ rights and support the healthy growth of margin trading.”

Galaxy is China’s eighth-largest brokerage by assets, according to a 2013 ranking by the Securities Association of China.

— With assistance by Aipeng Soo

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