* More than $35 bln in IPOs planned by Chinese companies
* Some $4.5 bln worth of share sales pulled just last month
* Citic Securities closes unchanged, underperforming market
* Shares dropped more than 10 pct earlier
* Citic Securities earns third of profits from brokerage
(Adds closing performance, stabilizing agent)
By Elzio Barreto
HONG KONG, Oct 6 Citic Securities Co Ltd,
China's largest listed brokerage, made a weak debut in Hong Kong
on Thursday, underscoring poor appetite for new share sales in
the face of global market volatility.
Its stock fell as much as 10.5 percent before closing
unchanged, while the broader Hong Kong index ended up nearly 6
The disappointing start for Citic Securities,
which raised a less-than-expected $1.7 billion in its first
listing outside the mainland, could dash the hopes of other
Chinese firms planning to raise funds in Hong Kong, the world's
biggest IPO market for the past two years.
The offering is the first of nearly $35 billion in share
sales in Hong Kong and China still planned in the coming months
by financial companies, including Haitong Securities, New China
Life and China Guangfa Bank.
"It's a very difficult time for any IPO because market
sentiment is so weak right now," said Patrick Yiu, a director at
CASH Asset Management. "Investors want to look for stocks now
with a track record with very low valuations. They don't have
the appetite for new stocks."
Citic Securities closed at HK$13.30, unchanged
from its listing price. The benchmark Hong Kong stock exchange
index closed up 5.7 percent, while the financial sector
sub-index jumped 6.5 percent.
Citic Securities Corporate Finance (HK) Ltd, or Citics CF
Hong Kong, was the so-called stabilising manager for the
offering. Stabilising managers are often hired to prevent a
decline below the offer price for stock listings.
The company sold shares at the bottom of a revised price
range of HK$13.30-$15.20 a share last week.
Equity fundraising worldwide slumped to its slowest since
early 2009 in the third quarter, Thomson Reuters data shows.
Year-to-date, IPOs worldwide are down 7 percent.
English Premier League soccer champions Manchester United,
British gymnasium operator Fitness First and Spanish state
lottery firm Loterias are among the prominent deals to have been
postponed due to turbulent markets.
Citic Securities, often seen as a proxy for China's stock
market, earns about a third of its profits from brokerage
activities and about 18 percent from trading.
With more than 2,000 listed companies, China's stock market
was the world's second most active by turnover behind the United
States in 2010, according to Citic Securities' prospectus.
Citic Securities is among the few companies to successfully
launch a stock offering in Hong Kong during the past few months,
with a long list of deals pulled or postponed.
Nearly half of the Citic Securities offer was mopped up by
high profile investors, including Singapore's state investment
vehicle Temasek Holdings Pte Ltd , the Kuwait Investment
Authority and hedge fund Och-Ziff Capital Management .
Citic Securities , already listed on Shanghai's
stock exchange, is part of China's state-backed conglomerate
Citic Group which was formed in 1979 as China's first financial
The bumpy start demonstrates the difficult fundraising
environment even for Chinese state-backed firms in Hong Kong.
"Right now the market condition is not very good, but I'm
satisfied the IPO got completed," the chairman of Citic
Securities, Wang Dongming, told reporters at a listing ceremony
at the Hong Kong Stock Exchange.
The listing comes at a time when global stock markets have
plunged amid concerns about the European debt crisis. The
benchmark Hang Seng index tumbled to a 2-1/2 year low on
Tuesday, falling in eight of the past nine sessions, during
which the index lost about 15 percent.
Citic Securities is the biggest Hong Kong listing since the
$2.5 billion IPO by luxury goods maker Prada in June.
Investors remain wary of equity markets because of growing
concerns that Europe's debt troubles could trigger a new banking
crisis and fears of renewed recession in the United States and a
slowdown, or even a hard landing, in China.
Just last month, some $4.5 billion worth of deals were
pulled in Hong Kong including Sany Heavy Industry
and rival XCMG Construction Machinery Co Ltd .
Apart from Citic Securities, only five companies, including
shoemaker Hongguo International Holding and tea
company Tenfu Holdings , sold stock in Hong Kong in the
past two weeks since offerings resumed after a two-month hiatus.
The five offerings raised a total of $510 million. The
slowdown in share sales in the past months in Hong Kong,
Singapore and other main markets in the region contributed to a
49 percent slump in Asia Pacific equity capital markets in the
third quarter from a year earlier.
Securities companies in China are forecast to post annual
profit growth of nearly 20 percent between 2011 and 2013, buoyed
by an increase in capital markets activity and new businesses
such as margin financing and private equity investments, BOC
The company plans to use about 65 percent of the Hong Kong
share sale proceeds for overseas expansion in research, sales
and trading, with 30 percent set aside to develop foreign
exchange, commodity and prime broking services for hedge funds.
Citic Securities' Shanghai-listed shares trade at a discount
to its Chinese peers because of its lower return on equity of
8.5 percent for 2011, compared with the sector average of 12
percent, Macquarie Group said in a research note.
Citic Securities was the sole global coordinator of the
offer, with a group of banks including BOC International, CCB
International, Bank of America Merrill Lynch and Credit
Agricole's CLSA unit helping to underwrite the deal.
(Additional reporting by Kelvin Soh and Alison Lui; Editing by
Denny Thomas, Michael Flaherty and Alex Richardson)