April 20, 2012 / 8:41 AM / 7 years ago

China's No 2 broker Haitong prices Hong Kong offer near bottom of range

HONG KONG (Reuters) - Haitong Securities Co Ltd, China’s second-biggest brokerage by assets, priced its $1.7 billion Hong Kong share offering near the bottom of an indicative range on Friday, leaving room for its shares to climb at the start of trading and draw more investors in what has been a slow market for listings in 2012.

As the biggest public offering of new shares in Asia Pacific so far in 2012, Haitong’s deal has been closely watched by investors, bankers and a growing list of companies hoping to raise funds in Asia’s top IPO destination.

Haitong, which is already listed on the Shanghai stock exchange, is pricing its shares at HK$10.60 each, it said in a statement posted on the Hong Kong stock exchange, confirming the pricing that sources had given Reuters earlier in the day.

It had marketed the offer at an indicative range of between HK$10.48 and HK$11.18.

It is selling 1.229 billion new shares, which puts the total deal value at HK$13.03 billion ($1.7 billion).

The sources were not authorized to speak publicly on the details of the share sale, while the company could not immediately be reached for comment.

The price of the Hong Kong offering is equivalent to a 16.7 percent discount to Friday’s closing price of 10.33 yuan for Haitong’s shares listed in Shanghai (600837.SS).

“It always makes sense from a capital markets perspective to leave some money on the table,” said a source involved in the Haitong deal, who was not authorized to speak publicly on the deal.

The shares will begin trading in Hong Kong on April 27.

A Haitong investor relations official in Shanghai was not aware of the pricing when contacted by Reuters late Friday.

FIRST DAY POP

Haitong is looking to revive investor appetite for stock offerings in Hong Kong after a slump in equity capital markets in Asia ex-Japan, that pushed activity down 37 percent in the first quarter from a year earlier to $36.7 billion.

IPO issuance led the decline, with a 75 percent slump.

Nearly 75 percent of initial public offerings in 2011 in Asia ex-Japan larger than $250 million traded below their offer price.

“A good performance definitely would help. If you look at the previous IPOs, normally we look at the first-day return (and) most of them dropped in 2011,” said Philip Mok, IPO research analyst at Phillip Securities in Hong Kong.

The brokerage pulled an up to $1.7 billion listing in December due to turmoil in global markets after marketing the offering at a 2012 price-to-book ratio of 1.17 to 1.32 times.

The most recent deal was pitched at a price-to-book ratio of 1.31 times, below 1.9 for its Shanghai-listed shares and 1.5 for larger rival Citic Securities.

Chinese brokerage stocks in Shanghai trade at an average P/B ratio of 2.19, according to Deutsche Bank estimates.

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 customers.

The company posted a profit of 3.28 billion yuan ($520.3 million) in 2011 on revenue of 10.86 billion, according to the offering prospectus.

Revenue from securities and futures brokerage accounted for 38 percent of the total, with 22 percent coming from interest income on deposits and about 10 percent each from proprietary trading, asset management and investment banking.

Citigroup Inc (C.N), Credit Suisse Group AG CSGN.VX, Deutsche Bank AG (DBKGn.DE), JPMorgan Chase & Co (JPM.N), UBS AG UBSN.VX and Haitong’s own Haitong International are acting as joint global coordinators on the offering.

BoCom International, HSBC Holdings Plc (HSBA.L)(0005.HK), ICBC International, Nomura Holdings Inc (8604.T) and Standard Chartered Plc (STAN.L) were also hired as joint book runners.

($1 = 7.763 Hong Kong dollars)

($1 = 6.304 Chinese yuan)

Additional reporting by Fiona Lau and Samuel Shen in Shanghai; Editing by Jean Yoon and David Holmes

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