Citi-linked broker Orient Securities' IPO oversubscribed in $150bn scramble

Orient Securities Company Limited's $1.6bn initial public offering (IPO) has been oversubscribed by a factor of over 90 as investors rushed to grab a piece of the Chinese brokerage amid soaring industry profits.

The roughly 10bn yuan share sale has attracted over 930bn yuan (£99.83bn, €139.97bn, $148.55bn), according to an Orient Securities statement posted on the Shanghai stock exchange on 13 March.

Funds put forward to buy shares have been frozen for three days, as per Chinese rules, after which a lottery decides who lands shares.

The massive demand for Orient Securities' shares, a joint venture partner of a Citigroup unit, means that the near £100bn in funds now on ice is the largest amount frozen during a mainland Chinese IPO in five years.

The funds will be frozen for three days, to be released on 16 March and 17 March. Orient said institutional investors put aside 432.5bn yuan for the chance to purchase shares in the IPO while retail investors set aside 506.5bn yuan.

However, only a tiny fraction of investors will get the stock: 1.62% of institutional investors and 0.59% of retail investors, Reuters reported.

Everbright Securities is underwriting the Orient Securities IPO.

Concerns

Orient Securities' looming listing comes amid concerns about China's brokerages facing imminent competition from banks.

China's securities regulator said on 6 March that it was considering issuing brokerage licenses to banks.

Booming business

Brokerages like Orient have seen profits double as retail investor numbers rise and trading volumes surge, boosted by the Chinese central bank's unexpected interest rate cut in November 2014, the news agency reported earlier.

Volumes have also been boosted by the Stock Connect scheme, which opened the same month, allowing direct trading of Shanghai and Hong Kong stocks on each other's bourses.

Orient Securities set up a joint venture brokerage -- Citi Orient Securities Co Ltd -- with Shanghai-Citigroup Global Markets Asia in 2012, according to the JV's website.

Citi Orient is headquartered in Shanghai and has a registered capital of 800m yuan.

In 2010, strong demand for China First Heavy Industries's Shanghai floatation resulted in the freezing of 960bn yuan.