HONG KONG: Haitong Securities, the second-biggest brokerage on the mainland by market value, said yesterday its Hong Kong unit is planning a major investment.

Shares of Haitong Securities were suspended from trade yesterday following reports that it plans to buy control of Hong Kong's Taifook Securities Group.

Haitong's shares would be suspended to "protect investors' interests" and to avoid "any major impact on the company's stock," Haitong said in an e-mailed statement yesterday, without giving further details about the nature of the investment.

Shares of Taifook were also suspended in Hong Kong, as were shares of NWS Holdings, which holds 62 percent of Taifook. Last week NWS said it was in talks to sell some of all of its Taifook stake, but did not identify a buyer.

Haitong had agreed to buy some or all of NWS's stake in Taifook, and has planned to bid for the remaining shares later, which valued Taifook at $454 million, a person with direct knowledge of the situation told Reuters on Saturday.

The deal would be the first purchase of a Hong Kong brokerage by a mainland counterpart looking to expand outside of the mainland, with more likely to follow.

"Hong Kong is attracting listings of more and more influential mainland companies, and will also become an offshore center for the Chinese yuan. However, mainland brokerages are too weak there," said Ren Chengde, analyst at Galaxy Securities. "If the Haitong acquisition is successful, it will encourage more mainland brokerages to follow suit."

Shanghai-based Haitong, which owns two fund houses, two direct investment companies and a Hong Kong subsidiary, aims to become a more international investment banking group.

Buying a brokerage in Hong Kong would enable mainland companies to immediately obtain business licenses and quickly expand their presence in an international financial market that bears a cultural affinity with the mainland, according to Chen Shuang, chief executive of China Everbright Ltd.

"Hong Kong is a very good platform that could link overseas and mainland capital markets," Chen said. "Haitong's acquisition would be a good start."

Haitong would buy the NWS stake for about HK$5 per share through a Hong Kong subsidiary, valuing Taifook at about HK$3.5 billion, a source familiar with the deal told Reuters.

China Daily/ Agencies

(HK Edition 11/17/2009 page4)