China creates $230 billion brokerage powerhouse as consolidation grows By Reuters

HONG KONG (Reuters) – The merger of two Chinese state-backed brokerages to create a sector leader with $230 billion in assets is part of Beijing’s push to consolidate the $1.7 trillion industry amid challenging markets, and the movement is poised to pick up the pace. , analysts said.

Shanghai-based Guotai Juan Securities is to acquire rival Haitong Securities in a share swap, the two companies said late on 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 house.

Consolidation of China’s brokerage industry is expected to accelerate, with a focus on state-owned shareholder-backed firms in the same system, Huatai Securities said in a research note.

Beijing has backed up rhetoric about the need for reform in the brokerage sector, with new directives to encourage mergers and acquisitions and restructuring in an industry where more than 140 Chinese and foreign players compete.

China’s securities regulator said in March it aims to develop about 10 top institutions in about five years, with two to three internationally competitive banks and investment institutions by 2035.

So far there have been M&A announcements between six smaller brokerage pairs, including Ping An Securities and Founder Securities.

The latest announcement comes three months after Shanghai Communist Party Secretary Chen Jining urged Guotai Junan to “become an influential and globally competitive investment bank” during a visit to the brokerage.

($1 = 7.0921)