Brokerage rides high on stocks boom
Surging interest in mainland brok erages, propelled by this week’ s boom in both the mainland and Hong Kong stock mark ets, has been cited as one of the k ey fac tors for the success of the H ong Kong Initial P ublic Offering (IPO) of GF Sec urities Co — the mainland’s fourthlargest securities house by assets.
GF Sec urities, based in Guangzhou, Guangdong province, raised $3.6 billion in its H ong K ong debut — Asia’s largest share sale and the world ’s secondlargest so far this year af ter the $4.8billion IPO by Spanish airport operator Aena S A in February.
The company’s share price soared 34.75 percent on F riday to close at HK$25. 40, as the benchmark H ang Seng Index (HSI) added another 1.22 percent to 27,272.39.
At HK$18.85 per share, GF Securities’ H ong K ong IPO price represents a 42percent discount to the Shenzhen price of 26.25 yuan on March 20. T he compan y’s closing share price on the Shenzhen Stock Exchange before its Hong Kong debut was 30.88 yuan — a 51percent premium over its IPO price.
“GF Sec urities was at tractively priced at a cheaper level, which has se t aside space for it to climb fur ther if we take into account the per formance of other duallisted mainland securities stocks in the past, such as Haitong and Citic Securities with narrower spreads,” reckoned Linus Yip Sheungchi, an equity analyst at First Shanghai Sec urities Ltd.
Hong K ongtraded shares of H aitong Sec urities and Citic Sec urities — GF Sec urities’ mainland peers — indicate discounts of 26 percent and 21 percent, respec tively, to their Shenzhentraded shares, based on Friday’s floatation prices.
Yip said in vestors’ strong interest in mainland sec urities firms has been boosted by the huge trading volumes in both the mainland and Hong Kong markets lately.
The benchmark Shanghai Composite Index, which had rocketed 53 percent last year, picked up another 25 percent at the close of trading on Friday.
“The mainland stock market’s latest bull run is bound to raise GF ’s trading volume, as well as the brokerage income of its in vestment bank,” Yip said. “It has enhanced investor confidence in the broker’s rosy outlook.”
GF Sec urities under wrote 31 companies’ equit y of ferings last year — from just six the previous year — according to the company’s prospectus. Revenue jumped 73 percent last year, while net profit was up a whopping 79 percent.
The HSI had risen more than 1,500 basis points in the past three da ys on record turnover since trading resumed on W ednesday following the Easter break.
“We believe the local stock market will enter an adjustment phase af ter such an amazing surge, ” Yip said. “But, we don ’t think it will evolve into a star tling shock or e xert serious down ward pressure on GF Securities.”
“Cheaper valuations of Hong K ongtraded shares, compared with those listed in the U S, Europe or on the mainland, will continue to attract capital infl ow, which could enable the H ang Seng I ndex to breach the 30,000point barrier by the end of this year,” he said.
an equity analyst at First Shanghai Securities Ltd