China Galaxy Securities Co. Ltd. (06881.HK) plans to use about half of the proceeds it will raise from a private placement of 200,000 new H-shares to boost its margin trading and short-selling businesses.
The move comes even as regulators have brought such activities under tighter oversight, the Hong Kong Economic Journal reported.
Galaxy Securities was among the brokerages that were warned by the China Securities Regulatory Commission recently in a crackdown on entities violating margin trading rules.
Despite the regulatory move, the brokerage feels there is a lot of room for expansion in the businesses, and that they would require 20 billion to 30 billion yuan in the coming three years.
Galaxy Securities had 5.88 percent market share in the Chinese short selling and margin trading market as of December last year, a study by Citigroup Inc. showed.
The Chinese broker had total outstanding position of 60.27 billion yuan.
Company officials however say the penetration rate on high-net-worth clients that use the two businesses stands at less than 30 percent, offering room for growth.
Over half of the clients hold less than 20 percent of their positions in short-selling or margin trading, executives said during a teleconference, according to the report.
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