(Bloomberg) -- China International Capital Corp., a top domestic securities firm, plans to raise as much as 27 billion yuan ($3.9 billion) with a rights issue in Shanghai and Hong Kong to fund the expansion of its business amid fierce competition between Chinese brokerages.

Under the plan, the Beijing-based state-controlled investment bank proposes to issue up to three rights shares for every 10 of its Shanghai and Hong Kong-listed shares, according to a company filing with the Shanghai bourse dated Wednesday.

Shares in Hong Kong fell 7.8% as of 9:55 a.m., while those in Shanghai were down about 7.9%.

The deal would be among the largest amounts raised by a Chinese 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, according to Bloomberg calculations. US banks such as Citigroup Inc. and JPMorgan Chase & Co. are also eyeing a bigger presence in the country.

“In the face of competition from foreign financial institutions and cross-sector institutions, local leading securities firms need to accelerate the pace of internationalization and actively participate in the international market,” CICC said in the statement.

CICC is likely raising capital to improve its capital-leverage ratio, which is the lowest among its peers, Citigroup Inc. analysts including Judy Zhang said in a report. More capital can help the company better meet demand from institutional clients, keep its market leadership, prepare for mergers and acquisitions and develop into an “aircraft-sized brokerage giant in China,” she said.

The Chinese government has said it wants more concentration in the highly-fragmented industry, calling for the creation of “aircraft-carrier sized” brokerages that can compete with the likes of Goldman Sachs Group Inc. The total assets held by China’s brokers amount to what Goldman Sachs alone holds.

Expansion Plans

CICC will use 24 billion yuan of proceeds raised from the planned rights offer to bankroll the expansion of traditional businesses from asset management to private equity as well as for the development of international businesses, fintech and “digital transformation” to boost its competitiveness overseas.

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The remaining proceeds from the offer, which calls for issuance of a total of about 1.45 billion rights shares and requires regulatory approval, will be used to supplement working capital, according to the statement.

Its controlling shareholder Central Huijin Investment has promised to fully subscribe to the rights offer in cash, it said.

(Updates with share price in third paragraph)

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Author: Bloomberg News