Bank of Communications

Mainland brokers seek expansion across the border

PUBLISHED : Monday, 11 February, 2008, 12:00am
UPDATED : Monday, 11 February, 2008, 12:00am

Mainland stockbrokers are seeking a share of Hong Kong's investment broking market - either by applying for new operating licences or through acquisitions.

In what could be a sign of more to follow, say local brokers, Haitong Securities - which opened a Hong Kong broking branch in January - is now planning to expand into asset management and investment banking.

A second mainland firm, Guosen Securities, is seeking a Hong Kong broking licence.

Hai Tong (HK) Financial Holdings, a newly established brokerage firm that is wholly owned by Shanghai-based Haitong Securities, expects to launch asset management and investment banking businesses next month.

'We are working on the application procedure and hope to submit our applications as soon as possible,' said Shirley Xu, deputy general manager of Hai Tong (HK).

Brokerage, however, would remain Hai Tong's core business in Hong Kong, she said.

The company has already hired officers for the asset management and investment banking arms.

'We have almost everything ready except for the approvals for our new businesses,' Ms Xu said.

Hai Tong (HK) started operations in Hong Kong at the beginning of the year amid poor market sentiment. The Hang Seng Index lost 15.67 per cent in January, marking the worst month for Hong Kong equities since October 1997.

Established in 1988, Haitong Securities was one of the first securities houses on the mainland.

Having become the mainland's largest broker in terms of capital during 2002, it floated shares on the Shanghai stock exchange in July 2007.

Meanwhile, another mainland brokerage, Shenzhen-based Guosen Securities, applied for a local brokerage licence with the Securities and Futures Commission recently, according to market sources.

'They have been actively sounding out the market for talent over the past few months,' said a banker who was invited to join the mainland brokerage.

Brokerages are allowed to operate in Hong Kong if they obtain a licence from the SFC.

They should also appoint approved representatives.

Mergers and acquisitions offer an alternative route into the local market.

'Mainland brokerages have been pitching through intermediaries for acquisitions of small to medium-sized brokerage houses in Hong Kong as it is potentially the fastest way to establish a business network. But no deals were made as they were so price-sensitive,' said the owner of a local retail brokerage who was approached by a mainland bidder last year.

'Nevertheless, they are cautious about acquisitions as it is not easy to manage a takeover deal,' the owner added.

New pastures

Haitong Securities is planning to expand into asset management and investment banking

Hai Tong (HK) launched its local operations at the beginning of the year. In January, the Hang Seng Index lost: 15.67%