Warburg becomes an investor in Haitong IPO

Haitong, considered China's second-largest brokerage by assets, aims to sell 1.2 billion shares priced between HK$9.38-$10.58 apiece from December 15. Tokyo-based Chuo Mitsui Trust and Banking Co., a subsidiary of Sumitomo Mitsui Trust Holdings, is also said to be buying $12 million Haitong shares, making it a second cornerstone investor. Warburg and Chuo Mitsui Trust's combined holding is believed to amount to13% of the company.

Haitong has said that the newly raised capital will be allocated to creating or acquiring securities companies abroad, as well as increasing its working capital.

The company is set to become the second Chinese brokerage to list in Hong Kong, following in the footsteps of Citic Securities, China's largest brokerage house. Citic made its public debut in Hong Kong in October, and despite the fanfare, priced at the low end of its HK$13.30-15.20 range.

Haitong's investors remain hopeful that the company will fare better than Citic, which earned $1.7 billion from its listing process, short of its $1.9 billion target. Leading up to the IPO, Citic generated global excitement, touted as the world's biggest float since economic volatility pummeled markets in August. At the time, Temasek Holdings, the Kuwait Investment Authority and hedge fund Och-Ziff Capital Management emerged as three of seven cornerstone investors taking a slice of the pie, together committing $850 million, or nearly half of the offering.

However, Citic performed poorly on its Hong Kong market debut, and saw its shares drop 10.5% before closing. Reports at the time noted that Citic ended its first day of trading at HK$13.30, the same as its listing price, while the benchmark Hang Seng Index gained 5.7% and the financial sub-index jumped 6.5%. Citic Securities Corporate Finance was brought in as a stabilizing manager for the offering, to prevent the stock from falling below its offer price.

Though Citic's performance didn't bode well for other companies looking to tap Hong Kong's capital markets, a handful of companies have submitted filings to complete floats before the year's end. These include Chow Tai Fook Jewellery Group, which has targeted up to $2.8 billion; and New China Life Insurance Co., which hopes to raise $2.28 billion in a Hong Kong-Shanghai duel listing. The latter counts Temasek and Standard Chartered Private Equity among its investors.

If Chow Tai Fook were to achieve its $2.8 billion target, it will become the largest IPO in Hong Kong this year. That title is currently held by Prada, which raised $2.5 billion in June.

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• Topics
• Greater China
• Financing
• China
• Financial Services
• Warburg Pincus Asia