Bloomberg News

Citic Falls in Hong Kong Debut as Cheaper Rivals Lure Buyers

October 06, 2011

(Updates with comments from Citic in sixth paragraph.)

Oct. 6 (Bloomberg) -- Citic Securities Co., China’s biggest brokerage by market value, declined in its Hong Kong trading debut as the depressed valuations of rivals lured investors.

Citic Securities fell as much as 11 percent to HK$11.90 and traded at HK$12.2 as of 11:01 a.m. The company, which is also listed in Shanghai, sold 995.3 million shares at HK$13.30 apiece last week, raising HK$13.2 billion ($1.7 billion) in Hong Kong’s biggest public stock offering in more than three months.

Companies including Sany Heavy Industry Co. canceled or postponed $8.9 billion in initial public offerings globally in the third quarter as equity markets plunged. Since Citic Securities priced its shares, the Hang Seng China H-Financials Index, which tracks large Chinese financial stocks listed in the city, has dropped nearly 16 percent before today amid Europe’s escalating sovereign debt crisis.

“The secondary shares of some blue-chip companies are trading at very low valuations,” Ronald Wan, a Hong Kong-based managing director at China Merchants Securities (Hong Kong) Co., said by phone. “Why should investors subscribe for IPO if the IPO valuation is not cheaper and the risk is actually higher?”

Citic Securities’ price-to-book value is about 1.65 times, based on the company’s Shanghai traded stock, that compared with the 3.96 times of the country’s second-largest brokerage GF Securities Co. and the 1.4 times of Haitong Securities Co., according to data compiled by Bloomberg. The Shanghai Composite Index slid 0.3 percent as of 11:01 a.m. local time.

“Investor demand was quite good especially in such market conditions,” Wang Dongming, chairman of Citic Securities, said today at the listing ceremony. “It’s good that we could complete the sale.”

The trading debut comes after Citic Securities closed the biggest share sale in Hong Kong since Italian fashion retailer Prada SpA raised $2.5 billion in June. The value of initial public offerings in the city dropped 65 percent in the three months through September, from the previous quarter, as stocks tumbled.

--With reporting by Mohammed Hadi in Hong Kong. Editors: Tan Hwee Ann, Russell Ward.

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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