April 10, 2015 / 3:35 AM / 3 years ago

UPDATE 2-GF Securities soars in HK debut as margin lending, trading boom

* Investors bet margin finance boom will benefit stock brokers

* Heavy volumes for HK bourse via new Stock Connect scheme help

* GF Securities raised $3.6 bln in Hong Kong share offer (Adds margin lending and earnings data)

By Elzio Barreto

HONG KONG, April 10 (Reuters) - Shares in China’s GF Securities Co Ltd jumped 36 percent in their Hong Kong debut, helped by a boom in margin lending for mainland brokers and rosy prospects for a scheme linking the city’s bourse with mainland exchanges.

Earnings at Chinese securities firms have ballooned as investors take advantage of margin lending to pile on bets, driving Shanghai and Shenzhen indices to multi-year highs.

At the same time, mainland investors are flocking to Hong Kong shares attracted by valuation differences, with trading volumes hitting a record and the benchmark index touching a seven-year high on Thursday.

Hong Kong Exchanges and Clearing Ltd, which operates the local bourse, said on Friday it expects it will “substantially increase” quotas for the stock connect program between Hong Kong and Shanghai.

Shenzhen-listed GF Securities, China’s No. 4 brokerage by assets, raised $3.6 billion through its Hong Kong offer last week, pricing the deal at the top of its marketing range.

Red-hot demand from retail investors, who put in orders more than 180 times the number of shares on offer, triggered a rule that forced underwriters to reallocate shares from institutional investors to individuals.

Its Hong Kong-traded shares rose as much as 42 percent to HK$26.80 but pared gains to HK$25.65 in afternoon trade. The benchmark Hang Seng index was up 0.5 percent.

GF Securities Shenzhen-listed shares have risen about 17 percent since the Hong Kong offer was launched three weeks ago.

Chinese investors have gorged on margin loans since they were first allowed in 2010. Outstanding margin loans and stock lending on mainland exchanges have climbed to nearly 1.6 trillion yuan ($260 billion) as of April 8, more than 100 times levels at the end of 2010, government figures show.

Margin lending is hugely profitable for GF Securities and larger rivals such as CITIC Securities Co and Haitong Securities Co , accounting for about 40 percent of revenue.

GF Securities, for example, typically charges clients a fee of 3 percentage points a year above China’s benchmark lending rate for six-month loans.

It said it expects first-quarter profit to nearly triple from the year-earlier period to as much as 2.57 billion yuan ($415 million), buoyed by the surge in mainland trading volumes.

GF Securities joins several Chinese banks, brokerages and insurers that are raising at least $30 billion in new funds through equity offerings in the next few months in Hong Kong, making 2015 the busiest year for the sector in five years. ($1 = 6.2090 Chinese yuan) (Additional reporting by Michelle Chen; Editing by Denny Thomas and Edwina Gibbs)

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