SHARES of China International Capital Corp. (CICC), a top domestic securities firm, dropped sharply yesterday after the company proposed raising about 27 billion yuan (US$3.90 billion) via a rights issue.

The Shanghai-listed shares of CICC closed down 9.20% at 39 yuan, while the firm’s Hong Kong-listed H shares finished the day 7.67% lower.

Under its plan, the Beijing-based investment bank proposes to issue up to 1.45 billion shares to existing holders of its A and H shares, who will get three new shares for every 10 held, it said in a late Tuesday filing. It expects to complete the issuance by the end of November.

In a separate filing, its controlling shareholder Central Huijin Investment Ltd. pledged to subscribe to all shares allocated to it with a cash payment.

CICC said it will use the proceeds to replenish capital and support business development and other working capital.

The deal would be among the largest amounts raised by a domestic brokerage through a rights issue, if the target amount is reached. CITIC Securities Co. raised 27.4 billion yuan earlier this year.

Chinese brokerages have been rushing to raise capital amid rising competition. Orient Securities Co., Caitong Securities Co. and Industrial Securities Co. have completed rights issues this year, with the industry raising more than 50 billion yuan in total. U.S. banks such as Citigroup Inc. and JPMorgan Chase & Co. are also eying a bigger presence in the country.

To offset the risk of share dilution, CICC said it aims to improve its operating efficiency and profitability, supervise the use of proceeds and maintain investor returns. (SD-Agencies)