Citic Securities' global ambitions have been given a boost with plans to buy stakes in CLSA and Cheuvreux, Credit Agricole's brokerage units.
The Beijing-based brokerage, the mainland's biggest by market value, said it would pay a combined US$374 million for a 19.9 per cent stake in each of the brokerages.
Following the deals, Citic and Credit Agricole, France's third-largest bank, would seek to create a global brokerage platform by integrating the CLSA and Cheuvreux businesses, Citic said.
Cheuvreux has a network of brokerages across Europe while CLSA is an Asian-focused securities firm. The investments are subject to regulatory approvals. Following the stake purchases, the partnership between Citic and Credit Agricole would become 'substantive', the Chinese brokerage said.
Citic is leading plans by Chinese brokerages to tap overseas securities markets, banking on the country's increasing financial strength.
It also has announced plans to launch a Hong Kong share offering to raise up to US$3 billion, part of efforts to hone its image as a global competitor in the securities sector.
'The deals reflect Citic taking a step-by-step approach in internationalising its businesses,' Huatai Securities analyst Zhou Lin said. 'Overall, Chinese brokerages are not prepared to participate globally but acquisitions should help them quicken the pace of going abroad.'
Citic Securities has been looking to renew overseas acquisitions for several years since its botched 2007 investment in US brokerage Bear Stearns.
In October 2007, Citic Securities announced plans to plough about US$1 billion in Bear Stearns, converting into about 6 per cent of the investment bank. But Citic ended the planned foray after JP Morgan bought Bear Stearns in a fire sale in March 2008.
Mainland brokerages have raked in handsome profits in the past years benefiting from the massive turnover on the market.
On the mainland the high-profit secondary market business is still off-limits to foreign companies which are not allowed to offer brokerage services. Foreign investors are allowed only to form joint-venture investment banks with local partners to manage A-share offerings.
Brokerage fees normally account for 60 per cent of mainland securities firms' total sales.
'To go global, Chinese brokerages must have a huge pool of talent even if they hope to achieve the goal through acquisitions,' Fudan University finance professor Chen Xuebin said. 'Cash is important but it's not a solution to internationalising a business.'
Citic Securities reported net profit of 11.3 billion yuan (HK$13.6 billion) in 2010, up 25.9 per cent year on year.
The brokerage will sell a 51 per cent stake in China Asset Management, the country's largest mutual fund house, and expects to book a one-time gain of 6.5 billion yuan.
Separately, Shanghai-based brokerage Haitong Securities also plans to list in Hong Kong, aiming to raise as much as HK$14 billion. In 2009, Haitong bought Hong Kong brokerage Taifook Securities Group and created Haitong International Securities.