By Alec Macfarlane and Kane Wu 

HONG KONG-- Citigroup Inc.'s Chinese securities joint-venture partner, Orient Securities Co., priced its Hong Kong initial public offering toward the bottom end of its indicative range, the latest sign of cooling investor appetite for China's brokerage firms.

Orient Securities priced shares at 8.15 Hong Kong dollars (US$1.05) apiece Wednesday for the offering after having set an indicative price range of HK$7.85 to HK$9.35 a share earlier this month, according to a person familiar with the matter.

The company will raise US$1 billion from the offering if the overallotment option isn't exercised.

The company's IPO is the biggest test of investor confidence in Chinese securities firms since the country's stock-market crash last summer. Brokerage houses were at the heart of China's bull run in the first half of 2015, benefiting from lofty trading volumes they helped fuel by being a large source of debt-financed trading, adding to demand for shares of brokerage firms. Huatai Securities Co. and GF Securities Co. managed to launch multibillion-dollar offerings during that time, both of which priced at the top end of their indicative ranges.

However, shares on China's benchmark Shanghai Composite Index haven't recovered after the market collapsed from a nearly seven-year high in June 2015, and they are down more than 30% since that peak. Huatai and GF's stocks have both fallen below their listing prices, as trading volume has tumbled and the market for debt financing to back those trades has cooled.

Before the Orient Securities deal, just two Chinese brokerage houses, Guolian Securities Co. and Hengtai Securities Co. Ltd., had braved the Hong Kong market for new listings since the stock market crashed. Both are now trading more than 10% below their IPO prices.

Orient Securities plans to use proceeds from the listing to expand its wealth-management business and other divisions, including its margin-lending and overseas investment-banking operations, according to its IPO filing.

Citigroup formed its partnership with Orient Securities in 2012, giving the U.S. bank a long-sought foothold in China's domestic investment-banking market. Known as Citi Orient, the joint venture can underwrite stocks, bonds and advise on mergers and acquisitions.

Orient Securities is due to list on the Hong Kong stock exchange on July 8. Its shares have traded in Shanghai since March 2015. Citigroup, Goldman Sachs Group Inc. and Nomura Holdings Inc. are handling Orient's listing.

Despite the lack of appetite, a handful of other large Chinese securities houses are pressing ahead with plans to list in Hong Kong, some with lower expectations of how much they could raise. The Wall Street Journal reported in May that Shenzhen-based China Merchants Securities Co. had cut the $4 billion-to-$5 billion expected size of its coming Hong Kong IPO by more than half. The firm's listing plans began before China's stock market plummeted and valuations for China Merchants' peers have since fallen, forcing it to rethink how much it would raise from the IPO. In the first quarter, China Merchants' net profit plunged more than 60% from a year earlier.

Everbright Securities Co. and Ping An Securities, the securities arm of Chinese insurance giant Ping An Insurance (Group) Co. of China Ltd., are among other local brokers planning multibillion-dollar IPOs in the former British colony.

Write to Alec Macfarlane at Alec.Macfarlane@wsj.com and Kane Wu at Kane.Wu@wsj.com

 

(END) Dow Jones Newswires

June 29, 2016 05:37 ET (09:37 GMT)

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