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China’s battered brokerages energised by Beijing’s consolidation blueprint seeking to foster world-class giants

  • China aims to have 10 brokerages of high calibre by 2029, nurture two to three firms to global scale by 2035, and make its capital markets globally influential by 2050
  • An efficient capital market led by home-grown giants can offset Washington’s threats to deny access to the deep, liquid US markets amid simmering geopolitical tensions

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A wave of mergers and acquisitions is about to transform China’s brokerage industry as Beijing presses ahead with its ambition to become a financial powerhouse by 2050. Illustration: Lau Ka-kuen
Zhang Shidongin Shanghai

After years in the doldrums, China’s brokerages are enjoying a revival of fortunes as a wave of consolidation breathes life into the 12 trillion yuan (US$1.7 trillion) sector, with the potential to create bigger, world-class entities that Beijing says can compete with the likes of Goldman Sachs and Morgan Stanley.

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The industry is warming up to the strategy outlined by the new chairman of China Securities Regulatory Commission (CSRC) Wu Qing, who wants to achieve this global goal by 2035. Taking a cue from this, Guolian Securities announced a plan last month to buy out smaller rival Minsheng Securities and execute a merger that will elevate it into the nation’s top 20 brokers, while Zheshang Securities made a bid for a 15 per cent stake in Guodu Securities last week.

This may be just the beginning, and more deals are in the pipeline, experts say, pointing to Pacific Securities and Founder Securities as possible acquisition targets for bigger rivals.

Reshaping the securities industry is part of the drive undertaken by CSRC boss Wu to revitalise the US$9 trillion stock market in a follow-through of President Xi Jinping’s ambition to build a global financial powerhouse. A high-stakes nine-point guideline document detailing stock-market reform proposals was issued by the State Council last month, calling for a restructuring drive that will boost the industry’s competitiveness.

“The supply-side reform of the securities industry is gathering pace,” said Xu Yizhou, an analyst at Industrial Securities in Shanghai. “Mergers and acquisitions will be the key themes to trade on in the future. Top players like Citic Securities will be able to make up for their shortcomings in business by becoming more competitive.”

FILE – A woman reacts in front of an electronic screen displaying stock prices at a brokerage house in Hangzhou in east China’s Zhejiang province, on Feb. 5, 2024. Photo: AP
FILE – A woman reacts in front of an electronic screen displaying stock prices at a brokerage house in Hangzhou in east China’s Zhejiang province, on Feb. 5, 2024. Photo: AP

Years-long of the languishing performance of the broader market has sapped the demand for stocks, bruising the financials of brokerages that have since fallen out of favour with investors. A Bloomberg-compiled gauge of 25 mainland-traded brokerages has slid 21 per cent over the past five years, trailing the benchmark CSI 300 Index that has lost 1 per cent. The underperformance has continued so far this year after the industry’s gauge lost 3 per cent, in sharp contrast with the 7.1 per cent gain in the CSI 300.

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