Huatai Securities is seeking to raise between $3 billion and $3.5 billion by selling some of its shares in Hong Kong, two sources close to the deal said on Monday.
Pending approval from the Hong Kong Exchanges and Clearing, Shanghai-listed Huatai Securities will begin gauging investor appetite and launch formal roadshows in mid-May, the two sources told FinanceAsia.
The brokerage becomes the latest mainland Chinese financial company seeking to float its shares as A- and H-share markets have boomed, following GF Securities's successful IPO.
Hong Kong’s Hang Seng Index has jumped by 12.7% since April 2 and is up 20.7% year-to-date. It hit a new seven-year high on Monday, closing at 28,491.64. The Shanghai Stock Exchange Composite Index has risen by 18.3% and 39.9% over the same periods, respectively.
With trading volumes also on the up, Chinese brokers are naturally seen benefiting. So there is a solid pipeline of brokers seeking to take advantage of strong investor demand by coming to market.
Recent precedent
GF Securities, China’s fourth largest broker by assets, raised HK$27.9 billion ($3.6 billion) on March after pricing its IPO at the top of the targeted range in a deal that subsequently grew to $4.12 billion after the company exercised a greenshoe option.
Shares in GF Securities have risen 31.8% since they began trading.
Demand for GF Securities was strong from both institutional investors and retail investors — the institutional book was covered on the first day after the deal launched and was multiple times covered across the price range. Some banking sources expect similar levels of demand for Huatai Securities.
Other mainland brokers that are thought to be seeking to list in Hong Kong include Citic Securities, China Galaxy Securities, and Haitong Securities.
JP Morgan and UBS are the joint sponsors for Huatai’s share sale, as is the firm’s affiliated, Hong Kong-based unit Huatai Financial.
Huatai Securities will use the proceeds from the offering to develop its margin finance and investment banking activities, which are capital-intensive, and support its commission-based investment and trading operations.
In 2014, it ranked first in China in terms of brokerage trading volumes of stocks and funds among mainland securities houses. It was the fifth-largest securities firm in China by total assets and net assets as of June 30, 2014.
