Guolian Securities soars on plan to acquire rival
Mainland brokerage Guolian Securities jumped by the most in almost four years in Hong Kong trading after unveiling a plan to acquire a majority stake in a smaller rival, foreshadowing an acceleration of industry consolidation after the regulator pledged to cultivate more top-tier investment banks.
Shares of the brokerage surged by 25 per cent to HK$3.69 yesterday, capping their best single-day performance since September 2020. Trading in its yuan-denominated shares was halted in Shanghai. They last traded at 10.46 yuan.
Based in Wuxi, Jiangsu province, Guolian plans to buy 95.48 per cent of unlisted Minsheng Securities after signing an agreement with 45 shareholders of the target on Thursday, according to an exchange statement.
Guolian would sell new yuandenominated shares to fund the acquisition, and trading in its shares was expected to resume in Shanghai in no more than 10 days, it said, giving no further details.
The deal marks the first merger in the mainland’s 11 trillion yuan (HK$12 trillion) brokerage industry after the China Securities Regulatory Commission announced its intent to nurture investment banks that can rival Goldman Sachs and Morgan Stanley over the next decade.
Meanwhile, top policymakers have been giving more attention to the nation’s US$9 trillion stock market, which has stabilised after a three-year downtrend.
The State Council this month issued a rare guideline document that outlines a reform path for the capital market through the middle of the century.
The acquisition is expected to make Guolian a top 20 brokerage with combined net assets of 32 billion yuan, according to Founder Securities.
The firm had net assets of 16.8 billion yuan at the end of 2022, ranking it in 36th place, while the book value for Minsheng was 15.2 billion yuan, it said.
The deal fuelled expectations that more of the industry’s big players would embark on acquisitions to boost market share.
Citic Securities, the nation’s biggest listed brokerage, jumped by 6.8 per cent to HK$12.32 and Haitong Securities gained by 5.5 per cent to HK$3.85, while China International Capital Corporation surged by 10 per cent to HK$9.80.
“The State Council’s guidelines will boost the industry’s core competitiveness by supporting top players through mergers and acquisitions as well as organisational innovation,” said Liu Xinqi, an analyst at Guotai Junan Securities in Shanghai.
“We expect an acceleration of industry consolidation, and that will benefit more top players.”
A three-year bear market has battered the brokerage sector. The industry suffered pay cuts for a second year in 2023, owing to worsening profitability and the government’s mandate to eradicate “hedonism” among financial workers.