KPMG 案例大赛2010

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KPMG 案例大赛2010

Citic Securities Company’s IPO1

Citic Securities Company (Citic hereafter) is the first company to go public in the investment banking and securities brokerage (IB&SB hereafter) industry in Mainland China in 2003. For issuers, going public will result in many kinds of costs as well as benefits. The main costs to go public include such as adverse selection, administrative expenses and fees and loss of confidentiality, and that the main benefits include such as overcoming borrowing constraints, greater bargaining power with banks, liquidity and portfolio diversification, monitoring, investor recognition, change of control and windows of opportunity.

China’s Securities Industry

The establishment of Shenzhen Special Economic Zone (SEZ) Securities Company in 1987 symbolized the birth of securities industry in Mainland China (China hereafter). In the early stage, most of securities firms were affiliated to state-owned financial institutions, including banks and investment trusts, and thus securities companies at that time were basically 100% state-owned enterprises with comparatively small scale. What’s more, they cannot get outside funding besides government bond repos and privately capital increases. Therefore, little room exists for securities companies to develop new products.

With the development of China’s capital market and the implementation of Securities Law of the People’s Republic of China in 1999, a variety of measures have been proposed to relax rules on funding by securities companies, as a result, a lot of securities companies emerged. Since mid-2001, the stock market went through a sustained weakness until late 2005. After a number of securities firms were closed in 2002-2003, serious consolidation got underway. The bull market came back in 2006 and most firms in the industry became very profitable. The China’s securities company marched into a new era. By the end of October 2010, there are 106 securities companies in China, including 14 listed companies.

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