Chinese brokerages to merge as industry heeds government’s call to consolidate

Name: SCMP
Telephone: +852-2680-8888

Shaanxi province-based Western Securities plans to take a controlling stake in Inner Mongolia-based Guorong Securities in an all-cash deal

Reading Time:2 minutes

Why you can trust SCMP

Western Securities is taking control of small rival Guorong Securities. Photo: Handout

Zhang Shidongin Shanghai

Published: 12:41pm, 21 Jun 2024Updated: 3:17pm, 21 Jun 2024

The pace of consolidation in China’s brokerage industry is gathering pace amid Beijing’s drive to cultivate world-class investment banks that can match global giants in size and scope.

Western Securities, a medium-sized Chinese brokerage based in northwest Shaanxi province, plans to take a controlling stake in smaller rival Guorong Securities.

The deal will be funded by cash, Western Securities said in a statement to the Shenzhen Stock Exchange on Friday, lifting its shares 4.8 per cent at the close to 6.77 yuan and taking its gains for the year to 6.3 per cent. Guorong Securities is not listed. The benchmark CSI 300 Index fell 0.2 per cent.

“Mergers and acquisitions will drive the re-rating of the industry, particularly among [highly] competitive players,” said Luo Zuanhui, an analyst at Shenwang Hongyuan Group in Shanghai. “We are positive on the sector because of the capital market reforms and ongoing industry consolidation.”

China has been revving up the pace of consolidation in its 12 trillion yuan (US$1.65 trillion) brokerage industry after the State Council in April unveiled a goal to nurture two to three securities firms over the next decade that can compete with global giants as part of its capital market reform.