BIZCHINA / Center
Citic Securities may raise US$2.5b in share sale
(Bloomberg)
Updated: 2007-06-05 14:50
Citic Securities Co., the most profitable brokerage in China, plans to
sell shares valued at about $2.5 billion, testing demand for new equities
after the nation's stock markets tumbled.
The company plans to sell 350 million new shares, it said in a statement
to the Shanghai exchange, without giving details on timing or pricing.
China's government last week tripled the tax on securities trading,
triggering a rout that eliminated at least $402 billion of market value.
Citic Securities, whose profit jumped 10-fold in the first quarter, may
still lure investors to its sale, said fund manager Xu Xiang.
"Citic Securities is one of the best-managed brokerages in China," said
Xu, who manages 2.5 billion yuan at Yinhua Fund Management Co. in
Shenzhen, including 6.4 million Citic shares. "The market slump may damp
investor confidence in stocks that aren't fundamentally sound, but it's
unlikely to affect Citic's offering."
The brokerage also said it plans to pay as much as 400 million yuan for
an additional 35.7 percent of unit China Asset Management Co., the
country's first developer of exchange-traded funds.
Citic Securities shares have slumped almost 19 percent since China
announced the higher stamp duty on trades on May 29. The benchmark CSI
300 Index, of which Citic is a member, dropped 4.9 percent today.
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"The company's earnings are very strong, and raising additional funds
will help it to expand its business better," said Liang Jing, an analyst
at Guotai Junan Securities Co. "However, as the market is having a
correction at the moment, it is difficult to say how much it can raise."
Citic Securities may use proceeds from the sale to buy other brokerages
and asset management firms, Xu said. China's government is encouraging
securities firms to combine after a five-year bear market that started in
2001 eliminated profits.
Most of the securities companies lost money from 2003 to 2005. Citic
Securities stayed profitable, though its net income plunged to 182
million yuan in 2004 from 1.46 billion yuan in 2000.
(For more biz stories, please visit Industry Updates)
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