China creates $230 bln brokerage powerhouse as sector consolidates
Guotai Junan to acquire smaller rival Haitong via share swap
Shares of China brokerages jump on hope of more mergers
Beijing has dialled up rhetoric on domestic brokerage mergers
Analysts say more brokerage mergers expected amid tough markets
Adds comment from analyst in paragraph 6, industry slowdown and context in paragraph 18-20, updates share prices
By Selena Li, Samuel Shen and Julie Zhu
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 Junan 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 shareholder approval.
The combined entity, with 1.6 trillion yuan ($226 billion) in total assets, will overtake Citic Securities 600030.SS as China's largest brokerage. Trading in shares of Guotai Junan and Haitong was suspended on Friday.
Both Haitong and Guotai Junan are controlled by companies running state assets for the Shanghai government.
Under the deal, Guotai Junan plans to issue new shares to investors in Haitong's mainland China and Hong Kong listed entities. Guotai Junan will also issue new shares in the onshore market to raise funds for the deal, exchange filings showed.
"This marks the start of an industry-wide consolidation that will see more mergers between major brokerages," said Huang Yan, fund manager of Shanghai QiuYang Capital Co, referring to the Guotai Junan-Haitong deal.
The consolidation focus will be on firms backed by state shareholders, Huatai Securities said in a research note.
Beijing has dialled 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 that it aimed to develop about 10 leading institutions in about five years, with two to three internationally competitive investment banks and institutions by 2035.
Beijing's ambition to create large, competitive investment banks comes a few years after a slew of global banks, including Goldman Sachs GS.N and Morgan Stanley MS.N, took full control of China businesses eyeing bigger market share.
There have been announcements about mergers between six pairs of smaller brokerages since end-2023, including, according to official Shanghai Securities News, the merger of Ping An Securities 601318.SS and Founder Securities 601901.SS.
PREVENTING RISK
The deal would fuel market expectations of more mergers including potential deals between CICC 601995.SS and Galaxy Securities 601881.SS, according to Xu Kang, an analyst at Hua Chuang securities.
Other possible mergers include a combination of Citic Securities and China Securities 601066.SS, Xu said.
Spokespersons for CICC, Galaxy Securities, Citic Securities, and China Securities did not immediately respond to Reuters requests for comment.
Shares of Chinese brokerages jumped on Friday on the merger news. An index tracking China-listed brokerages .CSI399975 gained as much as 2.6%, while the CSSW Securities Index .CSI399707 rose as much as 2.2%.
Shanghai-listed shares of CICC leapt as much as 8%, while Galaxy Securities rose as much as 10% to a two-month high. In comparison, the blue-chip CSI300 Index .CSI300 fell 0.5% to a seven-month low in the late afternoon trade.
Market volatility and dwindling initial public offerings and other capital market deals in a slowing economy have been weighing on the sector's earnings, with the performance of the smaller brokerages, in particular, taking a big hit.
Haitong, for example, suffered from quarters of plunging profits, loss-making international business, and scandals that included a top investment banker at the firm fleeing overseas before being arrested due to suspected job-related crime.
China's 43 listed brokerages saw their first-half revenue shrink 16%, with net profit slumping more than one fifth during the same period compared with a year ago, according to a research note from Guolian Securities.
In April, the State Council issued a guideline highlighting the need to strengthen regulation, prevent risks and promote the development of the capital market. It also encouraged leading securities and futures firms to enhance competitiveness through M&As, restructuring, and other means.
The latest merger could send a positive signal to the market that the "supply-side reform" in the sector was about to take place due to challenging market cycles and a tightened regulatory landscape, Morgan Stanley said in a research note.
"In the near term, we believe the announced deal could revive some investor interest in broker stocks generally, especially those with potential M&A stories," analysts at Morgan Stanley wrote.
($1 = 7.0921 Chinese yuan)
Reporting by Selena Li, Samuel Shen and Julie Zhu; additional reporting by Xie Yu; Editing by Sumeet Chatterjee and Stephen Coates
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ताजातरीन समाचार
अस्वीकरण: XM Group के सत्व केवल निष्पादन वाली सेवा और हमारी ऑनलाइन व्यापार सुविधा में पहुँच प्रदान करते हैं, ताकि व्यक्ति वेबसाइट पर या उसके जरिए उपलब्ध सामग्री को देख सके और/या उसका उपयोग कर सके। इसका प्रयोजन इसे बदलना या विस्तार देना नहीं है, न ही वह इसे बदलता या विस्तार देता है। इस तरह की पहुँच हमेशा ही निम्नलिखित के अधीन रहेगी: (1) नियम और शर्तें; (2) जोखिम चेतावनियाँ; और (3) पूर्ण अस्वीकरण। इसलिए ऐसी जानकारी सामान्य सूचना से अधिक कुछ भी नहीं है। विशेष रूप से, कृपया इससे अवगत रहें कि हमारी ऑनलाइन व्यापार सुविधा की सामग्रियाँ न तो किसी चीज का अनुरोध करती हैं, न ही वित्तीय बाजारों में प्रवेश करने की पेशकश ही करती हैं। किसी भी वित्तीय बाजार में व्यापार करने के साथ आपकी पूँजी को उल्लेखनीय जोखिम है।
हमारी ऑनलाइन व्यापार सुविधा में प्रकाशित सभी सामग्रियाँ शैक्षणिक/सूचनात्मक प्रयोजनों मात्र के लिए हैं, और इनमें वित्तीय, निवेश टैक्स या व्यापार सलाह और सुझाव नहीं हैं - न ही ऐसा समझना चाहिए कि इनमें ये सब हैं; न ही इनमें हमारी व्यापार कीमतों का अभिलेख है; न ही इनमें किसी वित्तीय उपकरण में लेन-देन करने का निमंत्रण या अनुरोध है; न ही ये आपको अवांछित वित्तयी प्रोमोशन पेश करती हैं।
इस वेबसाइट में मौजूद कोई भी तृतीय पक्षीय सामग्री, तथा XM द्वारा तैयार की गई सामग्रियाँ, जैसे: अभिप्राय, समाचार, अनुसंधान, विश्लेषण, कीमतें और अन्य सूचनाएँ या तृतीय पक्षों की साइटों के लिंक, "जैसा-है-वैसा" के आधार पर बाजार के बारे में सामान्य टिप्पणी के रूप में उपलब्ध कराई गई हैं, और वे निवेश हेतु सलाह नहीं हैं। जिस हद तक कीसी सामग्री को निवेश अनुसंधान मान लिया जाता है, उस हद तक आपको ध्यान में रखना होगा और इसे स्वीकार करना होगा कि वह सामग्री इस उद्देश्य से और निवेश अनुसंधान की स्वतंत्रता को बढ़ावा देने के लिए कानूनी आवश्यकताओं के मुताबिक, तैयार नहीं की गई है, और इसलिए उसे प्रासंगिक कानूनों और विनियमों के तहत विपणन संप्रेषण माना जाएगा। कृपया सुनिश्चित करें कि आपने गैर-आश्रित निवेश के बारे में हमारी सूचना को पढ़ और समझ लिया है। पीछे दी गई जानकारी के बारे में अनुसंधान और जोखिम चेतावनी यहाँ उपलब्ध है।
