China creates $230 bln brokerage powerhouse as consolidation gathers pace

Guotai Haitong Securities Co

06/09/2024 03:01

HONG KONG, Sept 6 (Reuters) - The merger of two
state-backed brokerages in China to create a sector leader with
$230 billion in assets is part of Beijing's drive to consolidate
the $1.7-trillion industry amid challenging markets, and the
move is set to gather pace, analysts said.
    Shanghai-based Guotai Juan Securities  601211.SS  is set to
acquire its cross-town rival Haitong Securities  600837.SS  via
a share swap, the two companies said late on Thursday. The deal
is subject to regulatory and shareholders' approval.
    The combined entity, with 1.6 trillion yuan ($225.6 billion)
in total assets, will replace Citic Securities  600030.SS  as
China's largest brokerage.
    The consolidation of China's brokerage industry is expected
to accelerate, with focus on firms backed by the state
shareholder that are within the same system, Huatai Securities
said in a research note.
    Beijing has dialed up rhetoric about the need for reform in
the brokerage sector, with new directives to encourage mergers
and acquisitions and restructuring in an industry in which more
than 140 Chinese and foreign players compete. 
    China's securities regulator said in March it aimed to
develop about 10 leading institutions in about five years, with
two to three internationally competitive investment banks and
institutions by 2035.
    So far there have been announcements of mergers and
acquisitions between six pairs of smaller brokerages, including
Ping An Securities  601318.SS  and Founder Securities
 601901.SS .
    The latest announcement comes three months after Shanghai
Communist Party Secretary Chen Jining urged Guotai Junan to
"march toward becoming a globally competitive, and influential
investment bank" during a visit to the brokerage. 
    ($1 = 7.0921 Chinese yuan)

 (Reporting by Selena Li, Samuel Shen and Julie Zhu; Editing by
Sumeet Chatterjee and Stephen Coates)
 ((Selena.Li@thomsonreuters.com; +852 39525868;))