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Chinese brokerage eyes biggest new listing in Hong Kong this year

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Chinese securities Brokerage Shenwan Hongyuan Group Co. Ltd. is seeking to raise up to HK$9.84 billion ($1.25 billion) through a listing in Hong Kong, which could become the largest new listing in the city so far this year.

The company, which is already listed in Shenzhen, is aiming to sell about 2.5 billion shares with a price range of HK$3.63 to HK$3.93, according to several Chinese media report. The float represents 10 per cent of the company’s enlarged share capital.

Chinese brokerages are highly dependent on trading volume for much of their income that comes from transaction fees, though they have tried to diversify in recent years through other offerings like wealth management products and investment banking services.

The company is China’s seventh-biggest brokerage by profit and fifth-largest by revenue, according to nationally compiled statistics. Its 2018 revenue rose 15.2 per cent  year-on-year to 24.1 billion yuan, while its profit attributable to shareholders fell 9.6 per cent to 4.2 billion. It blamed rising costs for its core trading business and higher bond interest rates for the profit decline.

The big majority of the listing will be sold to 13 cornerstone investors that have committed to buying around $830 million worth of the stock, or nearly 70 per cent of the offering if it prices in the middle of its range. The largest of those, an asset-management unit of leading state-owned bank ICBC, has agreed to buy $300 million worth of stock. Hua Insurance and China Life Insurance have agreed to buy $100 million and $80 million, respectively.

The company will launch its investor road show on Friday, with final pricing of the shares set for April 18 and a trading debut on April 26. Underwriters of the deal include Goldman Sachs, and international units of ICBC and Agricultural Bank of China.

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