Haitong Securities Co. Ltd. (06837.HK), China’s second-largest securities firm by assets, is raising HK$29.9 billion (US$3.9 billion) in a Hong Kong private placement, the Financial Times reported.
Other Chinese brokerages are expected to follow suit next year, the newspaper said.
Analysts said Haitong didn’t immediately need cash but was taking advantage of an opportunity to raise cheap funds.
Haitong’s sale of equity suggests brokerages are hesitant to take on more debt to support their expansion plans.
“Haitong’s equity raising comes at a time when the firm still has ample room to increase leverage, in theory, under current regulations,” Morgan Stanley analysts wrote in a note Monday.
“Leveraged increase may not be as easy as expected, as higher leverage will make it more difficult to get funding at reasonable cost from both banks via the interbank market and bond investors.”
The sale price of HK$15.62 per share is 16 percent below Haitong’s closing price in Hongkong on Friday and 45 per cent below its price in Shanghai.
Haitong’s H shares had risen 40 percent from the end of October to Friday’s close. They fell 1.94 percent to close at HK$18.24 Monday.
The firm will use 60 percent of the funds from the placement to expand margin financing and the lending of shares to short sellers, Haitong said in stock exchange filings.
Haitong is also expanding overseas.
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