Private firms driving investment banking revenue in China
Private firms have overtaken state-owned companies this year for the first time as the biggest drivers of investment banking revenues on the mainland.
Private firms have overtaken state-owned companies this year for the first time as the biggest drivers of investment banking revenues on the mainland - a sign of how Beijing's reforms are transforming private capital's role in the world's second-largest economy.
Nimble and boasting efficient management, these private firms are taking advantage of the internet industry boom and business expansion ambitions to take a bigger share of the deal activity compared with state-owned enterprises.
So far this year, about 78 per cent of the total value of mainland stock market listings, rights issues and other deals has come from the private sector, Dealogic data shows. This is up from last year, when the private sector accounted for less than half the total value of these deals. Between 2005 and 2010, when the mainland's four largest banks and a slew of large SOEs were listed, private deals made up a third of the value.
Private firms are also increasingly favouring foreign banks to advise on deals, undercutting the likes of China International Capital Corp (CICC) and China Galaxy Securities, which had built their fortunes on helping public entities to list and buy rivals.
The US$25 billion US stock market listing in September of Alibaba Group - the world's biggest ever - has largely contributed to this shift. Alone, it generated US$300 million in fees to banks.
"We will see spin-offs and repackaging of state-owned assets in the market place, but fundamentally the big change and the big swell is in the private sector," said Keith Pogson, managing partner for financial services at consultancy EY in Hong Kong.
