By Zhao Yidi (Bloomberg)
Updated: 2007-07-18 10:02

Haitong Securities Co, one of China's three publicly traded brokers, said shareholders approved a plan to quadruple its capital to help expand into investment banking and compete with overseas brokerages.

The Shanghai-based company said it will sell 1 billion new shares for at least 13.15 yuan each to no more than 10 institutional investors, including mutual funds, brokers, asset managers and insurers. Shares investors use to trade Haitong plunged yesterday by their 10 percent limit on the Shanghai exchange to 41.37 yuan.

Haitong is now traded under the name of Shanghai Urban Agro-Business Co, the publicly traded company taken over last month in a so-called backdoor listing. The broker's plan to rename Shanghai Urban as Haitong is still pending the approval of the securities regulator.

The planned stock sale gives Haitong funds to open branches, hire traders and arrange mergers for Chinese companies, preparing it for competition with Morgan Stanley and other overseas banks.

Haitong's capital base will soar to 1.36 billion shares after its stock sale.

"First-tier brokers are using all sorts of methods to boost their capital in a booming market that's getting more competitive now," said Cheng Weiqing, chief strategist of CITIC Securities Co in Beijing.

The exact number of shares Haitong will sell will depend on the "market situation and discussions with the investment bank", the broker said yesterday in its statement.

The stock sale will be arranged by Huatai Securities Co, a brokerage based in eastern China's Nanjing, Haitong's board secretary Jin Xiaobin said yesterday.

Haitong said it will use the funds to underwrite more financial deals to expand its investment banking division. It's also planning to enhance its brokerage business to benefit from the world's best-performing stock market this year.