Orient Securities Prices Hong Kong IPO Near Bottom of Range -- Update
June 29 2016 - 05:52AM
Dow Jones News
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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