(Yicai Global) Sept. 14 -- China International Capital’s shares both on the mainland and in Hong Kong slumped nearly 10 percent today after China’s largest investment bank said it plans to raise CNY27 billion (USD3.9 billion) via a new stock issuance plan to meet its development needs.

CICC’s mainland-traded stock [SHA:601995] closed down 9.2 percent at CNY39 (USD5.60). In Hong Kong [HKG:3908], its stock closed down 7.3 percent at HKD13.28 (USD1.70). Earlier in the day it dived 9.4 percent to HKD12.98.

CICC will issue no more than 1.448 billion new shares to all of its existing shareholders, the Beijing-based firm said yesterday. Subscribers will be allowed to buy three additional shares for every existing 10 that they hold. A maximum of 877 million shares will be issued in Shanghai and no more than 571 million in Hong Kong.

Due to the large gap between CICC’s stock price in Shanghai and Hong Kong, it is quite probable that the new issuing price will be higher than CICC’s stock price at the Hong Kong bourse, the company said.

Of the proceeds, CNY24 billion will go towards business development and the rest be used to supplement working capital, it said. The financing will help CICC meet the requirements of net capital supervision, enhance its risk resilience, grasp opportunities for development in the capital market and securities sector as well as improve its competitiveness both at home and abroad, it added.

The firm’s controlling shareholder Central Huijin Investment, which is owned by China’s central bank, has promised to participate in the financing process, and pay for its quota in cash, CICC said. Central Huijin currently holds a 40.1 percent stake in CICC, around 1.936 million shares. If it subscribes to the full quota of three per 10 shares, it could be purchasing an additional 581 million shares.

Based on today’s closing price in Shanghai, Central Huijing’s investment could pay around CNY22.6 billion (USD3.2 billion). But if calculated using the Hong Kong closing price, the subscription amount may only be HKD7.7 billion (USD981 million).

The actual issuing price will be determined by the parties concerned in advance, and the allotment will be implemented only after the scheme obtains regulatory approval, CICC said.

Editor: Kim Taylor