Haitong Securities Co Ltd, China's second-largest publicly traded brokerage, could raise about $1.7 billion with a listing in Hong Kong, two sources with direct knowledge of the deal said on Wednesday.

The company will offer 1.229 billion shares at an indicative range of HK$9.38 to HK$10.58 each, putting the total deal at up to HK$13 billion ($1.67 billion), said the sources, who could not speak publicly on the matter.

IFR, a Thomson Reuters publication, said the offering represented a price-to-book ratio of 1.17 to 1.32 times for 2012. Citic Securities priced its IPO in September at a ratio of 1.22 times.

Listed and based in Shanghai, Haitong Securities would follow larger rival Citic Securities, which raised $1.7 billion in Hong Kong late in September. It would also be competing for investors with a slew of other companies tapping capital markets in the final weeks of 2011 after a dismal second half.

Companies and their bankers are pitching deals to investors around the world despite ongoing volatility in global markets caused by Europe's debt woes and concerns over slower growth in China and the United States.

"Based on the current uncertain markets environment, for the short-term investors, it's better to wait to see if the macro environment becomes better," said Xingyu Chen, a banking analyst at Phillip Securities in Shanghai. "This absolutely depends on the risk tolerance and the period investors want to invest."

Haitong has 210 branches in 113 mainland cities with 13 more in Hong Kong and Macao and more than 4 million retail brokerage customers.

Haitong posted unaudited profits of 2.9 billion yuan ($453.1 million) in the first nine months of 2011, on revenue of 8.04 billion yuan. It forecast profits of at least 3.14 billion yuan for 2011.

"Because it's based on domestic financial markets, compared with other sectors or other areas in global markets, now it's quite an attractive opportunity to invest," Chen said.

Haitong said it recorded a net loss of 303.1 million yuan in the third quarter in its proprietary trading business because of monetary tightening and high inflation in China and worries about Europe's debt troubles that caused a surge in market volatility. The losses compared to investment gains of 802.7 million yuan in the first half of 2011.

Private equity firm Warburg Pincus LLC and Japan's Chuo Mitsui Trust & Banking Co, a unit of Sumitomo Mitsui Trust Holdings Inc, could be among investors buying Haitong shares, although no final decisions had been made on cornerstone investors, the sources added.

Reuters

(HK Edition 12/01/2011 page2)