Shares in Chinese brokerages gained on Thursday after China International Capital Corp (CICC) said it would acquire two rivals, stoking expectations of further consolidation in the country’s $1.6 trillion securities industry.
State-owned CICC said it will take over Dongxing Securities and Cinda Securities via share-swaps, saying the move would accelerate its growth and support China’s financial market reforms as well as cut costs and improve shareholder returns.
The deal is set to create China’s fourth-largest investment banking giant with assets exceeding 1 trillion yuan ($140 billion), trailing only CITIC Securities, Guotai Haitong Securities and Huatai Securities.
The central government has been keen to see more consolidation and foster large and globally competitive investment banks. Currently there are about 150 players in the sector.
The M&A plans will help CICC “replenish capital” and “catch up to peers in terms of scale,” Citi said in a note to clients, noting that Dongxing and Cinda were strong in terms of capital and their retail businesses.
Trade in CICC, Dongxing and Cinda was suspended as of Thursday.
Brokerages that saw their stocks gain on excitement about potential consolidation included Capital Securities in China, which climbed 5%. In Hong Kong, Orient Securities gained 4%, while Shenwan Hongyuan Group Co rose 2.5%.
The extent of CICC’s M&A ambitions remains unclear.
Reuters reported in February that CICC was planning to merge with Galaxy Securities.
($1 = 7.1147 Chinese yuan)
Reuters
