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China Merchants Securities in weak HK debut as mainland brokers face tough year

China Merchants Securities, the country's eighth largest brokerage by assets, made a flat Hong Kong debut on Friday as worries about volatile mainland stock markets and debt levels at mainland Chinese financial institutions hang over the sector.

The lackluster first day of trade comes after its $1.4 billion share offering met with tepid demand, pricing slightly below the middle of its indicative marketing range.

At its offering and latest trading price of HK$12.00, the company has a market value of about $15 billion. It plans to use part of proceeds from the new share issue to expand overseas, said Gong Shaolin, company chairman, at the listing ceremony.

"Chinese companies going global has become a trend. Our listing today is an important step for us to expand abroad further," he said.

Like other mainland rivals, the brokerage controlled by state-owned conglomerate China Merchants Group, is having a tough year.

Traders work on the trading floor of the Hong Kong Stock Exchange on the first day of trading after Chinese New Year in Hong Kong, China, on February 4, 2014.
Lam Yik Fei | Bloomberg | Getty Images
Traders work on the trading floor of the Hong Kong Stock Exchange on the first day of trading after Chinese New Year in Hong Kong, China, on February 4, 2014.

"Trading volume is down, and there are fewer IPOs. Many brokers are seeing their earnings falling. The market is trying to heal from the aftermath of last year's crash," said Hong Hao, chief strategist at BOCOM International.

China's stock markets have slumped 15 percent so far this year despite signs that the economy may be slowly steadying. Many investors have not returned since last year's crash, opting to put their money into the surgingproperty market instead.

The Shenzhen-based firm saw first-half net profit tumble 69.5 percent to 2.24 billion yuan ($330 million), hit by sharp drops in revenue for its broker, wealth management and investment businesses, according to its prospectus.

Its Shanghai-listed shares are down about 21 percent for the year to date. The stock has not traded this week due to China's Golden Week holiday.

Eleven cornerstone investors, including PICC Life, Chow Tai Fook and Fosun International, took up about 60 percent of the deal, Thomson Reuters publication IFR reported.

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