Citic Securities Sees No Change to $4.6 Billion Share Sale Plan
Comment of the Day

January 19 2015

Commentary by Eoin Treacy

Citic Securities Sees No Change to $4.6 Billion Share Sale Plan

This article from Bloomberg news may be of interest to subscribers. Here is a section: 

Citic Securities Co., China’s biggest brokerage by market value, said it will push ahead with a plan to sell about $4.6 billion of stock even after curbs on margin lending triggered a record plunge in its shares.

The broker’s plan to sell as many as 1.5 billion new H shares remains unchanged, a Hong Kong-based press officer said in an e-mailed response to questions today. Citic Securities said in December it would sell the shares, valued at $4.6 billion based on today’s price, to develop capital-intensive operations including margin financing and securities lending.

Chinese brokerages’ shares plunged today after the securities regulator banned three of the biggest firms from adding new margin-finance accounts for three months. Citic, Haitong Securities Co. and Guotai Junan Securities Co. let customers delay repaying financing for longer than permissible, the China Securities Regulatory Commission said Jan. 16.

The business and operations of Beijing-based Citic Securities remain unchanged, it said in today’s statement. Citic Securities shares fell by the 10 percent daily limit in Shanghai and dropped 16 percent, the most on record, at the close in Hong Kong.

?Haitong hasn’t changed its share sale plan, said a person with knowledge of the matter, who asked not to be identified discussing private information. It said in December it plans to raise about $3.9 billion from a sale of 1.92 billion new shares.

Eoin Treacy's view

Today’s announcement clipped the wings of highflying mainland brokers with the three main companies falling the daily limit of 10%. Brokerages have outperformed by a wide margin over last three months with Citic Securities returned to test its 2008 peak. Consolidation of that accelerated move is now underway. 

Mrs.Treacy bought the Shanghai listing of Citic Securities for our personal account in 2008 and we had a 50% profit in the share as of last week. If this were a trading position I would sell today in anticipation of buying back when the share exhibits signs of finding support but since it is an investment position I’m prepared to wait out what could be a potentially lengthy support building phase. 

Since the Hong Kong listings of Citic Securities and Haitong Securities did not rally to the same extent as their mainland counterparts they may find support quicker. Both returned to test their respective first areas of potential support and closed well off their lows today.  They will need to continue to find support at the upper side of their previous ranges if medium-term recovery potential is to be given the benefit of the doubt. 


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