A Citic Securities Co Ltd branch in Shanghai. The company could raise about $2.8 billion if it can sell H shares at a premium over its mainland-listed A shares. [Photo / Bloomberg]
SHANGHAI - Shares of Citic Securities Co Ltd jumped 1.71 percent at the close of trading on Tuesday. The advance came after China's biggest listed brokerage unveiled its roughly $2.7 billion Hong Kong IPO plan, potentially boosting the company's global competitiveness.
"Selling shares in Hong Kong will provide a good financing platform for Citic Securities to conduct overseas mergers and acquisitions," said Wei Tao, an analyst at China Securities Co.
"Like the dual-listed Ping An and China Merchants Bank, Citic Securities can now ramp up international expansion, and move towards becoming a world-class investment bank."
Citic plans to sell up to 10 percent of its enlarged capital base to overseas investors to raise funds for expansion abroad, the company said late on Monday.
It is joining rival brokerages such as Haitong Securities and China International Capital Corp (CICC) in a rush to expand abroad, seeking to capitalize on China's growing international clout and the rising status of the Chinese currency.
Citic shares rose to close at 14.28 yuan ($2.17), compared with its closing price of 14.04 yuan on March 22, when the shares were suspended from trading pending announcement of a major deal.
Citic said it has an option to increase the Hong Kong fundraising by 15 percent, and would use the proceeds from the share sale to set up or acquire overseas operations and develop overseas and cross-border businesses.
The company has been in talks with the French bank Credit Agricole on creating a broker and investment bank partnership to chase growing opportunities in China and the Asia-Pacific region. The two have set the end of June as the planned completion date for the talks, pushed back from the original aim of finishing the tie-up by the end of 2010.
Based on the company's current price in Shanghai, Citic Securities can raise about 18 billion yuan, including the greenshoe option.
Citic could raise about HK$22 billion ($2.8 billion) if the company can sell H shares at a premium over its mainland-listed A shares, and that would increase net asset value by 10 percent for each share, analyst Wei said.
Citic's fundraising plan underscores the government's support for Chinese brokerages' overseas expansion.
Many Chinese brokerages have established subsidiaries in Hong Kong in recent years, betting that China's further deregulation of its capital markets and yuan internationalization plan would help boost their overseas businesses.