China Merchants Securities' Hong Kong IPO to Raise $1.5 Billion

(Hong Kong) – China Merchants Securities Co., the investment banking and brokerage arm of state-owned conglomerate China Merchants Group, plans to raise $1.47 billion in a share issue in Hong Kong, while markets sputter due to a strong risk-averse sentiment.

CMC said on Sept. 26 that it will issue 891 million H-shares at an indicative price range between HK$11.54 to HK$12.78. Five percent of the shares will be reserved for retail investors. Trading of CMC shares in Hong Kong will begin on Oct. 7.

Eleven cornerstone investors have already subscribed about 60 percent of the share issue. The investors include PICC Life Insurance, China Life Insurance, Fosun Group and Advance Data Service Ltd, wholly owned by Tencent Holdings Ltd. Chairman Ma Huateng.

The IPO comes amid CMC's dismal performance this year. The broker, among the 10 largest in China, reported a 69 percent drop in net profit during the first half of this year to 2.2 billion yuan ($330 million) due to shrinking investment returns and a decline in its brokerage and wealth management business.

It also comes at a time when the Hong Kong exchange is sputtering due to a drop in investors' appetite for risk. As a result, the Postal Savings Bank of China, which issued the world's largest IPO last week, was forced to price its deals at the low end of the indicative ranges.

A number of Chinese securities firms are preparing for a public listing in Hong Kong this year as the mainland markets remain sluggish since last summer's market rout. In August, Everbright Securities raised HK$8.6 billion ($1.1 billion) in a Hong Kong offering. BOCOM International Holdings, the overseas advisory arm of the Bank of Communications, also announced plans to go public earlier this year.

Contact reporter Han Wei (weihan@caixin.com); editor Poornima Weerasekara (poornima@caixin.com)