China sets up largest securities company, determined to compete with Wall Street

Goutai Junan Securities Company is about to merge with Haitong Company to form a new enterprise with assets worth 230 billion USD - Photo: SHUTTERSTOCK

According to Bloomberg News, on September 5, two state-owned securities companies in China, Goutai Junan Securities and Haitong Securities, announced that they would merge.

Ambition to compete with Wall Street

Both companies are among China's largest financial companies and are jointly owned by the Shanghai Municipal State-owned Assets Supervision and Administration Commission.

After the merger, the new company will own assets of up to 1,600 billion yuan (230 billion USD), surpassing Citic Securities to become the largest securities company in China.

The merger plan is currently awaiting final approval from the boards of directors, shareholders of the two companies and regulators.

The deal comes a year after Chinese President Xi Jinping ordered regulators to focus on developing some of the country's top investment banks.

The above directive aims to build a system of securities companies "as large as aircraft carriers", capable of competing fairly with the "big guys" from Wall Street who are expanding their market in this country.

A wave of foreign financial firms began to enter China's financial market since Beijing allowed wholly foreign-owned companies to operate in 2020.

The China Securities Regulatory Commission has now voiced its support for the merger, aiming to have at least two to three world-class investment banks by 2035.

By the end of 2023, China had 145 securities companies, with total assets of up to 11.8 trillion yuan ($1.666 trillion).

Therefore, with an asset value of up to 13% of the total asset value of securities companies nationwide, the newly established company after the above merger promises to be a pioneer in China's efforts to compete with Wall Street.

The merger announcement of Goutai Junan and Haitong stated: "The merger is necessary to build a top-notch investment bank and stimulate the high-quality development of the financial industry."

Breakthrough expectations

China's stock market is going through a crucial phase, requiring a breakthrough to compete with the world - Photo: AFP

The merger of the two leading securities firms comes as China's financial sector is hampered by falling trading volumes, sluggish capital markets and stock valuations hit by sluggish economic growth.

Profits in the industry have fallen significantly. The industry outlook is also not very bright after the two leading companies in the industry, China International Capital Corporation (CICC) and Citic Securities, both posted negative growth in the first half of 2024.

Haitong itself saw profits fall by 75% in the first six months of the year, while its stock value fell 12% year-on-year.

Therefore, Mr. Zhang Jingwei, an analyst at SDIC Securities, commented: "The merger of Goutai Junan and Haitong is expected to be a milestone event for the trend of mergers and acquisitions among major Chinese securities companies. It will accelerate the process of industry consolidation.

Based on support from regulatory agencies, many medium and large securities companies are looking to acquisitions to expand their business scale, optimize corporate structure and strengthen long-term competitiveness.

Source: https://tuoitre.vn/trung-quoc-lap-cong-ty-chung-khoan-lon-nhat-quyet-canh-tranh-pho-wall-20240906184617205.htm