Guolian Securities, a brokerage based in Wuxi, Jiangsu province, experienced a significant surge in its stock price, marking a 25% increase, the most notable rise since September 2020, after announcing an acquisition plan of a 95.48% majority stake in Minsheng Securities. This strategic move anticipates a trend of consolidation driven by reforms in the Chinese securities sector. While the company’s share in the Shangai market saw a slight decline, the Hong Kong trading price leaped forward. Funding for this acquisition will come through the sale of new shares on the domestic market, with trading of Guolian’s onshore stock to resume promptly. This stands as the inaugural merger following the Chinese regulator’s ambition to breed investment banking giants on par with international entities like Goldman Sachs and Morgan Stanley, reflecting a broader move by top policymakers to revamp the $9 trillion stock market. The merger is projected to catapult Guolian into the top-20 brokerages with total net assets estimated at 32 billion yuan. Founder Securities highlights the significant improvement in Guolian’s comprehensive business capacity post-merger. The State Council issued guidelines earlier this month promoting mergers, acquisitions, and innovation among leading brokerages to enhance core competitiveness within the industry, indicating that more prominent players may follow suit. Nonetheless, the brokerage sector overall has weathered tough times with a three-year bear market, mandatory salary cuts, and regulatory challenges, potentially leading to a 20% profit dip for the quarter according to forecasts. This development signals a pivot towards a concentration of market share and influence among Chinese brokerages, as well as a sharpening of strategic objectives reflective of state-led market reform initiatives.

Financial Services, Capital Markets,China, Hong Kong

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