China to create megabrokerage by combining Guotai Junan and Haitong Securities

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State-backed brokerages Guotai Junan and Haitong Securities are merging to create a firm with US$237 billion in assets to rival Wall Street

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A Beijing branch of Guotai Junan Securities. Photo: Shutterstock

Zhang Shidongin ShanghaiandMia Castagnonein Shanghai

Published: 9:38am, 6 Sep 2024Updated: 3:58pm, 6 Sep 2024

China will combine Guotai Junan Securities and Haitong Securities to create a megabrokerage with 1.68 trillion yuan in total assets (US$236.9 billion), part of a government-led push to make the nation’s financial services sector competitive with Wall Street.

Guotai Junan plans to absorb Haitong in a stock swap, through which shares will be issued to holders of Haitong’s yuan-denominated A shares and Hong Kong-listed H shares, according to separate statements from the two companies. If combined, the new firm will surpass Citic Securities as China’s biggest brokerage in both total and net assets, according to Huachuang Securities.

Guotai Junan and Haitong are both owned by Shanghai’s state-owned asset administrator and the merger is pending approval from the companies’ boards and shareholders – as well as regulatory authorities – the statements said.

“It’s expected to be a milestone event for mergers and acquisitions between China’s top brokerage firms and will further speed up the industry consolidation,” said Zhang Jingwei, an analyst at SDIC Securities. “Against the backdrop of regulatory support, some medium-sized and big brokerages are keen to seek acquisitions to expand business scale, optimise the business structure and enhance long-term competitiveness.”

The securities industry is paying heed to Beijing’s call for nurturing home-grown world-class investment banks, and the high-profile merger is a major step in that direction for the 12 trillion yuan sector. The goal for Chinese banks to be able to compete on the global stage was outlined in a document issued in April by the State Council to bolster the stock market.

Until now, medium-sized brokerages had taken the lead in the consolidation, with Zheshang Securities, Guolian Securities and Guosen Securities so far unveiling plans to acquire smaller rivals.

A Haitong Securities signboard is seen in Wuhan, central China’s Hubei province. Haitong, which started in 1988, has a network of 341 branches serving more than 24 million clients. Photo: Imaginechina via AFP