GF Securities, Asia's largest IPO this year, soared on its trading debut on Friday, benefiting from the mainland stock boom and Hong Kong's stock rally. Asia News Photo

Surging interest in mainland brokerages, propelled by this week's boom in both the mainland and Hong Kong stock markets, has been cited as one of the key factors for the success of the Hong Kong Initial Public Offering (IPO) of GF Securities Co - the mainland's fourth-largest securities house by assets.

GF Securities, based in Guangzhou, Guangdong province, raised $3.6 billion in its Hong Kong debut - Asia's largest share sale and the world's second-largest so far this year after the $4.8-billion IPO by Spanish airport operator Aena SA in February.

The company's share price soared 34.75 percent on Friday to close at HK$25.40, as the benchmark Hang Seng Index (HSI) added another 1.22 percent to 27,272.39.

At HK$18.85 per share, GF Securities' Hong Kong IPO price represents a 42-percent discount to the Shenzhen price of 26.25 yuan on March 20. The company's closing share price on the Shenzhen Stock Exchange before its Hong Kong debut was 30.88 yuan - a 51-percent premium over its IPO price.

"GF Securities was attractively priced at a cheaper level, which has set aside space for it to climb further if we take into account the performance of other dual-listed mainland securities stocks in the past, such as Haitong and Citic Securities with narrower spreads," reckoned Linus Yip Sheung-chi, an equity analyst at First Shanghai Securities Ltd.

Hong Kong-traded shares of Haitong Securities and Citic Securities - GF Securities' mainland peers - indicate discounts of 26 percent and 21 percent, respectively, to their Shenzhen-traded shares, based on Friday's floatation prices.

Yip said investors' strong interest in mainland securities 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 investment bank," Yip said. "It has enhanced investor confidence in the broker's rosy outlook."

GF Securities underwrote 31 companies' equity offerings 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 days on record turnover since trading resumed on Wednesday following the Easter break.

"We believe the local stock market will enter an adjustment phase after such an amazing surge," Yip said. "But, we don't think it will evolve into a startling shock or exert serious downward pressure on GF Securities."

"Cheaper valuations of Hong Kong-traded shares, compared with those listed in the US, Europe or on the mainland, will continue to attract capital inflow, which could enable the Hang Seng Index to breach the 30,000-point barrier by the end of this year," he said.

gladdy@chinadailyhk.com

(HK Edition 04/11/2015 page6)