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Hong Kong stock market to get US$2b boost

Monday, June 20, 2016 - 12:19
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[HONG KONG] Hong Kong's stock market is set for a US$2 billion boost this week as major mainland China financial firms list units in the city, relying on large-scale backing from domestic institutions to offset investors jitters over political concerns in Europe and the potential for a US interest rate hike.

Brokerage Orient Securities Co, which has an investment banking joint venture with a unit of Citigroup Inc in China, on Monday launched a share sale that could raise up to an US$1.15 billion, according to a term sheet seen by Reuters.

Meanwhile CDB Leasing, a unit of state financial institution China Development Bank, will take orders for an up-to-US$980 million IPO on Tuesday, according to Thomson Reuters publication IFR, which also first reported the Orient Securities deal.

Both transactions are heavily reliant on the backing of'cornerstone investors' - institutions which commit to holding shares for at least six months and help guarantee initial demand before the deals are launched.

Bankers say they expect global markets to be on edge this week as Britons vote on whether to stay in the European Union, while concerns over the US Federal Reserve's plans for interest rates are also evident.

Orient Securities, which filed for the Hong Kong listing under the name DFZQ, has a cornerstone tranche covering about 45 per cent of its deal. It's offering 957 million shares in an indicative range of HK$7.85 to HK$9.35 apiece, potentially raising up to HK$8.95 billion (S$1.55 billion).

The company secured funds from 10 cornerstone investors, including China's Hung Jia Finance and Bocom International Global Investment, which have agreed to buy US$474 million of the shares on offer.

Meanwhile the CDB Leasing business - formally known as China Development Bank Financial Leasing Co Ltd - is counting on a group of state-owned investors to buy nearly 77 per cent of shares in its initial public offering, according to IFR.

CDB Leasing is offering shares in an range of HK$1.90 to HK$2.45 each and tapped six cornerstone investors including Three Gorges Corp, China Reinsurance and China State Shipbuilding for its deal, IFR reported.

Orient Securities and CDB Leasing didn't immediately reply to requests for comment on their deals.

REUTERS