Several domestic securities companies have handed in proposals to the securities watchdog to issue corporate bonds, sources have said.

Guangzhou-based GF Securities and Beijing-based China Galaxy Securities are among the first batch of applicants.

Also actively preparing for bond issues are several other major securities houses, such as CITIC, Guotai Jun'an and Haitong.

A spokesman for GF Securities told China Daily yesterday that the company had submitted its proposal to the China Securities Regulatory Commission (CSRC) and is awaiting an answer.

The CSRC announced at the end of August that domestic securities companies would be able to issue corporate bonds starting from October 8, opening up a new financing channel for securities businesses.

The move is generally regarded as a major boost to the securities companies, which have been facing limited financing avenues even while the bear market has eroded their income.

Market sources said that GF is expected to issue 5-year corporate bonds worth 960 million yuan (US$116 million) with annual interest rate capped at 3.9 per cent.

China Galaxy Securities is planning a bigger issue, possibly of 3 billion yuan (US$362 million), with a similar interest rate and term.

CITIC Securities announced in a circular last month that it wanted to issue 2 billion yuan (US$241.5 million) of 5-year corporate bonds.

Insiders said most of the securities companies would choose to place the bonds privately to a limited group of investors instead of floating them to public investors.

"Private distribution of the bonds will make it much easier for the securities companies, which have good investors," said a researcher with the Development and Research Centre of the State Council.

CSRC has drafted rules that set qualifications for the bond issuers, from asset scale and profitability to credit record.

A securities company, for example, needs to have minimum assets of 1 billion yuan (US$121 million) and should have made profits in the previous year. The size of the issue cannot exceed 40 per cent of the company's net assets.

Regarding the type of bonds, they can be either sold to the public and listed in the bourses, or sold privately to qualified investors.

Qualified investors are institutions or bodies that have licences for securities investment and a minimum registered capital of 10 million yuan (US$1.2 million) or net assets of 20 million yuan (US$2.4 million).

So the potential buyers of privately placed bonds would mainly be insurance companies, trust and invest.

Editor: Catherine