(Yicai Global) Jan. 5 -- Huatai Securities satisfies the conditions needed to proceed with a sale of CNY28 billion (USD4.1 billion) of new stock to existing shareholders, the Chinese brokerage said today after investors questioned the rights issue.

Huatai plans to raise as much as CNY28 billion by issuing three new shares for every 10 listed on the Shanghai and Hong Kong stock markets held by current investors, it said on Dec. 30. That would make it as big as last January’s share rights issue by Citic Securities, China’s biggest brokerage.

The plan has been approved by the board and still needs to get the nod from the board of shareholders, Nanjing-based Huatai Securities said today.

But the proposed rights issue has not gone down well with investors. An open letter entitled ‘Application to Deny Huatai Securities’ Rights Offering’ and addressed to the China Securities Regulatory Commission was posted online on Dec. 31.

The letter said Huatai’s fundraising is too frequent, is unnecessary, and the financing method is inappropriate. The amount it plans to raise is much higher than the dividends it pays and does not match the firm’s market capitalization.

Huatai Securities [SHA: 601688] closed up 1.3 percent at CNY12.06 (USD1.75) in Shanghai today, while its Hong Kong-traded stock [HKG:6886] edged up 0.6 percent to end at HKD9.30 (USD1.20).

Its Shanghai shares plunged 8 percent on Jan. 3, the first trading day of the year, to CNY11.64 (USD1.69), the lowest since March 2016.

Institutional investors sold a net CNY38.6 million (USD5.6 million) of the broker’s mainland-listed stock yesterday, expending the net outflow to a fifth straight trading day, according to financial data provider Wind Information.

Listed brokerages should consider shareholder returns, value-creating ability, business status and market strategies when determining their financing plans and methods, a CSRC spokesperson said in a newsletter published unusually during trading hours on Jan. 3.

The regulator supports reasonable financing activities by securities’ firms, it added.

Editor: Kim Taylor