(Correct paragraph 2 of the company name to Guotai Junan, not Guotai Juan)
HONG KONG (Reuters) – The merger of two state-backed brokerages in China to create an industry leader with $230 billion in assets is part of Beijing’s efforts to consolidate the $1.7 trillion industry amid challenging markets, and the move is set to gain momentum, analysts said.
Shanghai-based Guotai Junan Securities is set to acquire rival Haitong Securities in a share swap, the two companies announced late Thursday. The deal is subject to regulatory and shareholder approval.
The combined entity, with 1.6 trillion yuan ($225.6 billion) in total assets, will replace Citic Securities as China’s largest brokerage.
Consolidation in China’s brokerage industry is expected to accelerate, with a focus on state-backed firms within the same system, Huatai Securities said in a research note.
Beijing has stepped up rhetoric on the need to reform 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 aimed to develop around 10 leading institutions in about five years, and two to three internationally competitive banks and investment institutions by 2035.
So far, M&As have been announced between six smaller brokerage peers, including Ping An Securities and Founder Securities.
The latest announcement comes three months after Shanghai Communist Party Secretary Chen Jining urged Guotai Junan to “march towards becoming an influential and globally competitive investment bank” during a visit to the brokerage.
($1 = 7.0921 )