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October 1, 2009

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Broker forms private-equity unit

Guotai Junan Securities Co has launched a private-equity unit to invest in domestic companies prior to their initial public offerings.

The 500 million yuan (US$73.2 million) unit will target companies involved in retailing, services, clean energy, health care, information technology and advanced manufacturing.

The brokerage follows more than a dozen other Chinese brokerages into the private-equity business.

The China Securities Regulatory Commission in May lowered the threshold for local brokerages to deal in private-equity investments to encourage the flow of more funds into the market as part of its economic recovery strategy. The move was also aimed at helping brokers to better compete with overseas rivals.

The commission has approved 15 Chinese brokerages for private-equity business, including China CITIC Securities, Guoyuan Securities and Changjiang Securities. They have more than a combined 10 billion yuan available for investment.

China's growth enterprise market in Shenzhen is expected to open this month, providing another financing channel for smaller start-up firms that often face difficulties getting loans from banks.

Among the first batch of 94 firms to apply for listings on the new board, more than one-quarter have investments from private equity or venture capital firms, according to Zero2IPO, a Beijing-based investment consulting firm.


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