Mainland, HK brokers face barriers to joining up
Trust and pricing remain the major obstacles to meaningful deals being struck between mainland and Hong Kong brokerage firms, industry leaders said.
Yim Fung, president of the Chinese Securities Association of Hong Kong, which represents 50 mainland securities firms in Hong Kong, said association members were eager to initiate business co-operation with their Hong Kong counterparts.
Striking up co-operative agreements would be a win-win solution for both parties, he said, since it would be a cost-effective way for mainland firms to expand, while Hong Kong firms could save on operating costs like risk control, compliance and trading systems.
'More and more mainland firms are opening for business in Hong Kong, and the existing ones keep on expanding,' said Yim, who estimated that mainland firms now employed 7,000 people, more than double the 3,000-odd workforce in 2009.
'However, considering the high price-to-book value of Hong Kong firms, not many are willing to expand business through mergers and acquisitions,' he added.
Several mainland firms are eyeing Hong Kong brokerages as springboards to broaden their client base in Hong Kong and overseas. Among them is Mainland Southwest Securities, a mid-sized brokerage based in Chongqing and listed on the Shanghai stock market, which is looking at small local brokerages for possible acquisition, the South China Morning Post has heard.
There are more than 400 securities firms in Hong Kong, some 300 of which are local operations. Last year, more than half a dozen closed because of the downturn in the stock market, while international firms like Samsung Securities axed their local equity-sales businesses.
Brian Fung Wei-lung, chairman of the Hong Kong Securities Association, said family-sized businesses might find it attractive to go into partnership with mainland companies, but he doubted if medium-sized firms would.
'Being a boss is different from being a senior executive,' Fung said. 'Why would they give up their business just to save some money?'
William Leung Wing-cheung, CEO of Sun Hung Kai Financial, said local brokerage firms that were working with mainland firms remained concerned about differences in culture and business strategy.
Another local broker, who preferred not to be named, said there might be trust issues.
'Who can guarantee that the bigger company might not ditch you after poaching your clients?'
The approximate number of securities firms in Hong Kong. About three-quarters of these brokerage companies are locally run