China Merchants Securities taps British market

Mainland broking giant steps up global expansion into commodities with London unit focusing on derivatives sector

PUBLISHED : Wednesday, 11 December, 2013, 2:12pm
UPDATED : Thursday, 12 December, 2013, 1:45am

China Merchants Securities, one of the mainland’s oldest and largest securities houses, has set up a subsidiary in Britain to expand into global capital and commodities markets, with a focus on derivatives – at a time when Western rivals are trying to scale back from a business that often comes with high profits and equally high risks.

Industry sources familiar with the matter told the South China Morning Post that CMS, headquartered in the southern boomtown of Shenzhen bordering Hong Kong, launched China Merchants Securities (UK) in London, but there was no official announcement yet.

CMS declined to comment.

Membership [in CME is] another step towards globalising our business

The company’s move to secure a footprint in Britain came around the same time that British Prime Minister David Cameron was keen to warm up Sino-British relations, with a focus on how to attract investment from the world’s No 2 economy and help his administration keep Britain’s economic recovery steady.

Cameron recently wrapped up his official visit to China and declared that Britain would be China’s biggest advocate in the West.

Stephen Chan, who is now a deputy CEO of China Merchants Securities (Hong Kong), has been named chairman of the new British unit, which CMS wholly owns.

Chan, a veteran investment banker specialising in the commodities business, will divide his time between London and Hong Kong, which will remain his primary office, said the sources.

Last month, CMS was granted membership in the Chicago Mercantile Exchange (CME), paving the way to accelerating its expansion into the global commodities market.

”We see this membership as another step towards globalising our business,” he said in a statement issued by CME.

“Obtaining CME Group clearing membership is part of [CMS] strategy to meet huge demand from the mainland to hedge the commodities price risks globally on major commodities exchanges,” said Chan in the statement dated November 13.

Chan’s previous positions include being chairman of BOCI Global Commodities UK, a London-incorporated unit of BOC International – which is the offshore arm of Bank of China, one of the mainland’s Big Four state lenders.

Chan helped BOCI became the first Chinese clearing member of the global commodities exchanges, including CME and the London Metal Exchange. Bank of China also has a wholly owned unit in London.

After the London office is set up, China Merchants Securities also plans to hire dozens of commodities and equities traders, and bankers to help it secure local business ties and clients quickly, said the sources.

This will be a ray of light for British bankers and traders who are facing growing risks of being laid off at major international banks, where staff numbers have trimmed.

Bloomberg reported last week that total headcount in commodity units at 10 major global banks, from Goldman Sachs Group to Barclays, stood at 2,290 at the end of September, about 4 per cent less than at the end of last year, according to data starting in 2009 from Coalition, a London-based analytics company.

China Merchants Group is the parent company of CMS. Initially established in the late Qing dynasty to build warships to fight foreign invaders including the British army during the Opium War, the century-old industrial parent now also controls China Merchants Bank, the mainland's sixth-largest bank by assets.