HONG KONG (Reuters) – China’s plan to merge two state-run securities firms to create an industry leader with $230 billion in assets is part of a accelerating government push to consolidate the $1.7 trillion industry amid a tough market environment, analysts said.
Shanghai-based Guotai Junan Securities will acquire Shanghai rival Haitong Securities in a stock swap, the companies said late Thursday. The deal is subject to regulatory and shareholder approval.
With total assets of 1.6 trillion yuan ($225.6 billion), the combined company will replace CITIC Securities as China’s largest securities firm.
Consolidation in China’s securities industry is expected to accelerate, with a focus on companies backed by state shareholders within the same system, Huatai Securities said in a research note.
The Chinese government has stressed the need for reform in the securities industry, issuing new directives to encourage mergers, acquisitions and restructurings among the more than 140 Chinese and foreign companies competing in the sector.
The China Securities Regulatory Commission said in March that it aims to develop around 10 leading institutions within about five years and two to three internationally competitive investment banks and institutions by 2035.
So far, mergers and acquisitions have been announced between six small brokerages, including Ping An Securities and Founder Securities.
The latest announcement comes three months after Shanghai’s Communist Party Secretary Chen Jining visited Guotai Junan Securities and urged the firm to “strive to become a globally competitive and influential investment bank.”
(1 dollar = 7.0921)
(This story has corrected the company name to Guotai Junan instead of Guotai Juan in the second paragraph)
