HONG KONG (Reuters) – A 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 tough markets and is set to gain momentum, analysts said.
Shanghai-based Guotai Juan Securities will acquire rival Haitong Securities through a share swap, the companies said late Thursday. The deal is subject to regulatory and shareholder approval.
The combined entity, with total assets of 1.6 trillion yuan ($225.6 billion), will replace CITIC Securities as China’s largest brokerage.
The pace of consolidation in China’s brokerage industry is expected to accelerate, with a focus on state-backed companies that operate within the same system, Huatai Securities said in a research note.
Beijing has stepped up its rhetoric on the need for reform in the brokerage sector, with new guidelines to encourage mergers, acquisitions and restructuring in an industry where more than 140 Chinese and foreign companies compete.
China’s securities regulator said in March it aims to develop about 10 leading institutions in about five years, with two to three internationally competitive banks and investment institutions by 2035.
So far, there have been merger and acquisition announcements between six pairs of smaller brokerages, including Ping An Securities and Founder Securities.
The latest announcement comes three months after Shanghai Communist Party Secretary Chen Jining called on Guotai Junan to “move towards becoming a competitive and influential global investment bank” during a mediation visit.
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