CITIC Securities, China's largest securities firm by market value, is considering listing in Hong Kong in the wake of its pioneering joint venture agreement with US investment bank Bear Stearns, the Financial Times reported on Monday.
The newspaper quoted Citic Securities Chairman Wang Dongming as saying an offshore listing for Citic, the securities arm of Citic Group, would help to make it a truly global firm. "It would help us internationalise our mindset," he said. "If you list in Hong Kong, you become real."
Wang said there were still several serious issues to be considered before a final decision on a Hong Kong listing could be made. These include the Hong Kong Stock Exchange's requirement that listings in the territory must cover a minimum of 15 percent of issued share capital, the report said.
In addition, the Chinese government requires all companies listing outside mainland China to hand over 10 percent of the proceeds to the national social security fund, the newspaper said, adding this would cost Citic Securities about 5 billion yuan ($668 million), based on its current share price in Shanghai.
Citic Securities has been increasing its earnings rapidly and expects to continue growing fast, but Wang said there was an artificial element to valuations in China. "Everyone is over-enjoying their market capitalisation," he said. "We know these high multiples can't last forever."
Wang said he had studied the bubble years of the late 1980s in Japan and was determined to avoid what he saw as the missed opportunities of the big Japanese securities firms.
"We pay attention because the Japanese used to be so important in the world," he said. "So many of them were in the top tier and today, none of them are. We ask why they are no longer first tier?"
Wang attributed this Japanese decline to a failure to invest in information technology, and a domestic focus that created reluctance to recruit enough non-Japanese staff to become global players.