UPDATE 4-Haitong Securities pulls $1.7 bln HK offer-sources

Mon Dec 12, 2011 2:46am EST

* Haitong may reconsider HK offering in 2012-sources

* Haitong's Shanghai-listed shares decline 1.4 pct

* Bigger rival Citic Securities raised $1.7 bln in Sept

* Investors becoming "picky" as year winds to a close

By Elzio Barreto and Denny Thomas

HONG KONG, Dec 12 (Reuters) - Haitong Securities Co Ltd, China's No.2 brokerage by assets, has pulled its up to $1.7 billion Hong Kong stock offering due to poor market conditions, sources said on Monday, casting doubts on upcoming deals in the latest blow for new listings in Asia's once booming IPO centre.

The company had been set to price the offering on Monday, after delaying the pricing on Friday as regional equity markets swooned. Instead, Haitong decided not to pursue the offer and will relaunch it in the first quarter of next year, depending on market conditions, two of the three sources who confirmed the decision to Reuters said.

"People are very cautious about their investments coming into the year-end," said Ronald Wang, managing director of China Merchant Securities. "They will be picky about the choices they make," Wang added.

The fact that Haitong was not the first securities company to raise funds in Hong Kong this year did not help matters either, Wang added. In September, China's biggest listed brokerage, Citic Securities, raised $1.7 billion and the stock tumbled 10.5 percent on its first day.

"Most of the issuers will face a tough year in 2012 as the conditions next year are not going to be any better than this year," Wang added.

The sources had direct knowledge about the matter but were not authorised to speak about it on the record. Haitong Securities' investor relations executives declined comment.

"Haitong doesn't have a huge urgency for funds right now and hence can afford to wait for the market to improve," said Core Pacific senior analyst Timothy Li.

The cool reception to Haitong's Hong Kong offering contrasts sharply to Shanghai IPOs of smaller rivals Soochow Securities Co Ltd and Founder Securities. Soochow Securities, a medium-sized brokerage based in the eastern city of Suzhou, closed 13.4 percent higher in its trading debut in Shanghai on Monday, after raising $511 million in an IPO last week.

Founder, the Chinese partner of Credit Suisse , has gained nearly 19 percent since going public in August with a $910 million IPO.

YEAR-END RUSH

Hong Kong, the world's busiest IPO market for the past two years, has seen a year-end rush for deals after the euro zone debt crisis virtually shut the IPO market in the second-half. At least five more Hong Kong deals totalling about $1.5 billion are slated to be priced before the year-end, according to IFR estimates. Haitong's decision to postone its offer could cast a doubt over the fate of some deals, bankers said.

Among the upcoming deals, Guodian Technology and Environment Group, a maker of wind equipment, will price its up to $643 million IPO on Wednesday, while windfarm developer Beijing Jingneng Clean Energy is slated to price a $300 million offering on Thursday. The IPOs will be no easy sell, given the plunge in clean technology companies, investors said.

China Tianrui Group Cement Company Ltd, which was set to start on Monday a roadshow for its up to $300 million IPO, also pulled its offering, a company spokeswoman said on Monday.

Amid waning investor appetite, IPO issuance in Asia ex-Japan has more than halved this year to $72.4 billion, according to Thomson Reuters data.

Haitong's decision comes after three offerings totalling $4.3 billion in Hong Kong and Shanghai were priced at the low-end of expectations, indicating weak investor demand for the deals.

Haitong's offer was backed by global private equity firm Warburg Pincus, which had committed $210 million to the offer. It is rare for large IPOs backed by cornerstone investors to be pulled, although in September, China's largest construction machinery maker, Sany Industry Co Ltd, dropped its $3.3 billion offering.

Haitong was aiming to sell 1.229 billion new shares at between HK$9.38-10.58 each.

Haitong's Shanghai-listed shares closed 0.6 percent lower.

Founded in 1988 as Shanghai Haitong Securities Co, the firm has 210 branches in 113 cities in mainland China, with 13 more in Hong Kong and Macau and more than 4 million retail brokerage customers.

Citigroup Inc, Credit Suisse AG, Deutsche Bank, JPMorgan and Haitong's own Haitong International acted as joint global coordinators on the offering. HSBC Holdings Plc , Nomura, Standard Chartered Plc and UBS AG were also hired as joint bookrunners.

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