Broker jungle

22 March 2017 By Lisa Jucca Follow @LJucca

Guotai Junan Securities is poised to raise $2 bln in Hong Kong. The sector is crowded, margins are thin, and regulators are fickle. But Guotai’s scale and breadth position it well to benefit from more liberalisation and better enforcement.

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Chinese broker Guotai Junan Securities won approval from the Hong Kong stock exchange for its planned share offering of about $2 billion, IFR reported on March 16, citing people familiar with the situation.

The brokerage plans to start pre-marketing of the deal as early as this week. It plans to sell no more than 1.04 billion H shares, excluding a greenshoe option of 15 percent of the base deal, IFR reported.

The firm went public in China in June 2015, raising nearly $5 billion in what is still the largest mainland listing since 2010.

Guotai Junan Securities said in its draft prospectus its 2016 operating revenue and net profit ranked second in its industry. Average return on net assets from 2007 to 2016 was 18.8 percent, above the industry average of 14.7 percent, it said.

Revenue from Guotai Junan Securities’ investment banking business accounted for 9.6 percent of the total, up from 6.1 percent in 2014, according to the draft prospectus. Its average stock brokerage net commissions in China have fallen to 4.4 basis points in 2016 from 7.1 basis points in 2014, it said.

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