China securities regulator to check brokers’ financing needs after Huatai share plan

CHINA’S securities regulator said it would fully check securities firms’ financing needs, after Huatai Securities proposed a share placement plan that would be one of the biggest in the country’s brokerage industry.

The China Securities Regulatory Commission (CSRC) said in a statement on Tuesday (Jan 3) that, as part of its vetting process, it would fully pay attention to the necessity for, and rationality of, securities firms’ financing.

The comments came after Huatai Securities, one of China’s biggest brokerages, said on Friday that it was planning to raise 28 billion yuan (S$5.44 billion) in A-share and H-share placements.

The CSRC said it has noticed a “certain listed brokerage firm’s refinancing activity” and encouraged brokers to focus on their main business, capital-saving and high-quality development. The regulator added that listed brokers should reasonably determine financing plans and methods, and safeguard the legitimate rights and interests of all types of investors, especially small and medium-sized investors.

It also said it supported reasonable financing for securities companies.

Shares of Huatai Securities slumped roughly 7 per cent in Shanghai and about 2 per cent in Hong Kong as markets reopened after the New Year holidays.

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Huatai planned to use proceeds from the placement to replenish capital, and to use as working capital. The latter would be used to develop its margin financing and securities lending business, as well as its fixed income, equity and over-the-counter derivative business. It would also be used to fund subsidiaries.

The brokerage said there was a risk of diluting returns after the placement, as the company’s capital stock would increase. It added that the share issue plan would have to be approved by the CSRC. REUTERS