Stake sale to help in trial run
By Winny Wang |
March 16, 2010, Tuesday
|
Print Edition
Print Edition
CITIC Securities Co plans to sell part of its stakes in two subsidiaries to comply with regulatory requirements, and the stake sale will pave the way for it to take part in a trial operation for margin trading.
The country's largest listed brokerage will transfer part of its stakes in China Securities Co and China Asset Management Co, according to its statement filed with the Shanghai Stock Exchange.
"The stake transfer will eliminate uncertainties over Citic Securities' participation in margin trading and short selling to make it among the first batch of brokerages under the project," said Liang Jing, an analyst of Guotai Jun'an Securities Co.
Citic Securities, which holds 60 percent in China Securities Co and 100 percent in China Asset Management Co, didn't specify the portion it plans to transfer or name a stake buyer.
Earlier media reports said Lenovo Group will buy the brokerage's entire stake in China Securities Co for about 8 billion yuan to 9 billion yuan (US$1.2 billion to US$1.3 billion), and the Beijing state-owned asset regulator is also likely to be the buyer.
"Citic Securities may have weak pricing power if it sold the stake to the Beijing state-owned asset regulator but is likely to get financial and policy support in the future. If it sells the stake to Lenovo, the deal can be priced in a market-oriented way," said Luo Yi, an analyst at China Merchants Securities.
China is expected to launch the trial for margin trading in April. Margin trading allows brokers to fund stock purchases by individual investors while short selling allows retail investors to sell borrowed securities with the aim of buying them back later at lower prices to profit from the difference.
The securities regulator has ruled that an institution can hold stakes in not more than two brokerages and hold controlling stakes in only one. The institution can't own more than 49 percent of a fund company.
The regulator urged brokerages, which want to take part in the program, to solve the problem quickly.
The country's largest listed brokerage will transfer part of its stakes in China Securities Co and China Asset Management Co, according to its statement filed with the Shanghai Stock Exchange.
"The stake transfer will eliminate uncertainties over Citic Securities' participation in margin trading and short selling to make it among the first batch of brokerages under the project," said Liang Jing, an analyst of Guotai Jun'an Securities Co.
Citic Securities, which holds 60 percent in China Securities Co and 100 percent in China Asset Management Co, didn't specify the portion it plans to transfer or name a stake buyer.
Earlier media reports said Lenovo Group will buy the brokerage's entire stake in China Securities Co for about 8 billion yuan to 9 billion yuan (US$1.2 billion to US$1.3 billion), and the Beijing state-owned asset regulator is also likely to be the buyer.
"Citic Securities may have weak pricing power if it sold the stake to the Beijing state-owned asset regulator but is likely to get financial and policy support in the future. If it sells the stake to Lenovo, the deal can be priced in a market-oriented way," said Luo Yi, an analyst at China Merchants Securities.
China is expected to launch the trial for margin trading in April. Margin trading allows brokers to fund stock purchases by individual investors while short selling allows retail investors to sell borrowed securities with the aim of buying them back later at lower prices to profit from the difference.
The securities regulator has ruled that an institution can hold stakes in not more than two brokerages and hold controlling stakes in only one. The institution can't own more than 49 percent of a fund company.
The regulator urged brokerages, which want to take part in the program, to solve the problem quickly.
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