Sealand, based in South China's Guangxi Zhuang Autonomous Region, will complete the capital injection in the next few months, according to people with direct knowledge of the matter.

Existing shareholders at Sealand, including Shanghai-listed Guangxi Guidong Electric Power Co, have agreed to double their investment in the broker, the sources said. Guidong owns 14.8 percent of Sealand.

"Sealand is among a raft of brokers seeking to shore up capital to win favor from regulators for new business," said a securities source in the southern Chinese city of Shenzhen.

"After the fund infusion, the broker hopes to apply to participate in the upcoming financial derivative businesses and pursue a stock sale either through a back-door listing or an initial public offering."

Sealand was in talks to take over Shenzhen-listed loss-making Guilin Jiqi Pharmaceutical Co, whose shares halted trading late last year pending a shareholding revamp.

But the deal has yet to be finalized and would be subject to approval from the regulator, which is now getting stricter in vetting proposals for back-door listings in its bid to prevent insider trading, the sources said.

Sealand charted a 2006 net profit of 120 million yuan, compared with mere 1.06 million yuan in 2005. A loss of 44.2 million yuan in 2004 prevents the broker from seeking an IPO immediately, however, as regulators require domestic listing candidates to post a profit for three consecutive years.

"Sealand still prefers a back-door issue at the current stage because it's faster, and it's very likely the firm can gain regulatory approval in coming months," said a second source close to the broker.

"But if the takeover plan fails, Sealand is set to launch an IPO next year, as it is expected to chalk up a hefty profit this year and qualify for a public stock sale."

A slew of giant mainland brokers, including GF Securities Co and Haitong Securities Co, gained government approval to conduct back-door listings this year as part of regulatory efforts to beef up the industry after years of stock market slumps.

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