China securities regulator to check brokers' financing needs after Huatai share plan

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SHANGHAI (Reuters) -China's securities regulator said it would fully check securities firms' financing needs after Huatai Securities Co Ltd proposed a share placement plan that would be one of the biggest in China's brokerage industry.

The China Securities Regulatory Commission (CSRC) in a statement on Tuesday said it will fully pay attention to the necessity for, and rationality of, securities firms' financing, as part of its vetting process.

The comments come as Huatai Securities, one of China's biggest brokerages, said on Friday it plans to raise 28 billion yuan ($4.07 billion) in A-share and H-share placements.

The CSRC said it has noticed a "certain listed brokerage firm's refinancing activity" and encourages brokers to focus on their main business, capital-saving and high-quality development.

Listed brokers should reasonably determine the financing plan and method, and safeguard the legitimate rights and interests of all types of investors, especially small and mid-sized investors, the regulator said.

The CSRC also said it supports reasonable financing for securities companies.

Shares of Huatai Securities slumped roughly 7% in Shanghai and about 2% in Hong Kong as markets reopened after New Year holidays.

Huatai planned to use proceeds from the placement to replenish capital as well as for working capital, including for developing its margin financing and securities lending business and its fixed income, equity and over-the-counter derivative business, and also to fund subsidiaries.

There is a risk of dilution of returns after the placement as the company's capital stock will increase, Huatai said, adding the share issue plan has to be approved by the regulator.

($1 = 6.8845 Chinese yuan renminbi)