[HONG KONG] Chinese banks, brokerages and insurers plan to raise at least US$30 billion in new funds through equity offerings in the coming months, which would make 2015 the most active year for the financial services sector since 2010.
The year started with a bang, with more than US$6 billion of equity deals in less than three months, including a US$3.9 billion private placement by China's second-largest brokerage Haitong Securities and the US$1.6 billion Shanghai initial public offering of Orient Securities, Thomson Reuters data shows.
Chinese banks and insurers are raising funds to strengthen their balance sheets and meet new capital adequacy rules, while brokerages are tapping the capital markets to expand their profitable margin financing and other lending businesses.
The capital-raising, in turn, would be a boon for investment banks targeting Hong Kong and China equity deals for the bulk of their fee revenues in the Asia-Pacific region.
Fund-raising through equities has suffered for years from lacklustre investor interest due to concerns over non-performing loans and weak stock markets in mainland China. The rush of deals this year points to a more upbeat outlook, especially for financial companies, following a series of monetary easing measures in China.
The Hang Seng China H-Financials index has rallied more than 30 per cent in the past year. In the coming months, the pipeline of expected deals includes an IPO of up to US$3 billion by China Huarong Asset Management, the country's biggest bad-debt manager, and Hong Kong share sales worth US$2 billion each from brokerages Huatai Securities and GF Securities.
"Considering the cut in monetary policy, considering the earnings outlook for the banks, it will be an interesting window of opportunity for them to issue shares," said Francois Perrin, head of Greater China equities at BNP Paribas Investment Partners Asia, adding that he favours insurers over banks due to growth in the insurance industry and their higher return on equity.