CUT-THROAT competition has prompted medium to small brokerages to consolidate in the face of increasing risks and high operating costs, with a Shenzhen and a Hainan firm pioneering a merger. The merger of Shenzhen-based Great Wall Securities (GWS) and Hainan Huitong Securities - the securities department of Hainan Huitong International Trust and Investment Corp - was approved by the People's Bank of China last month. It comes as brokerages are struggling hard to survive in a market battered by poor sentiment, shrinking volumes and falling indexes, which saw trading commissions lowered and dwindling incomes. According to Shanghai Securities News yesterday, the merger is the first of its kind in China. Previous offers for brokerages usually involve equity acquisition. The Great Wall Securities Co Ltd - as the new company will be called - will have a registered share capital of 157 million yuan (about HK$146.01 million), which will be met by GWS and Hainan Huitong through capital injection. More than 10 new shareholders will be introduced to the company. The equity breakdown between GWS and Hainan Huitong, plus other new shareholders supposed to hold a minor stake, were not revealed. It was understood that the deal was structured in a way that the pair would be put on equal terms with the other. GWS, with operating networks all in Shenzhen, will enjoy an enlarged network also covering Beijing, Shanghai, Wuhan and Haikou - cities where Hainan Huitong has operations. Following the merger, the new company will have total assets of 700 million yuan throughout its operations in five mainland cities, with a workforce of more than 300. 'Total securities traded on behalf on clients throughout the country combined to reach eight billion yuan as at November of this year,' according to the report. An analyst with the securities department of Shenzhen's Ping An Insurance Co of China said it had become a trend for smaller brokerages to merge to counter risks and high operating costs in the sluggish market. The analyst said the deal would be watched closely because it paved the way for similar deals in the future. The market is buzzing with talk that Guangdong International Trust and Investment Corp is to take control of the securities department of the Shenzhen branch of the People's Construction Bank of China. Yu Jun, general manager of GWS's Binhe district sales office, said yesterday that the company had a niche in the primary and secondary share market, while Hainan Huitong fared better in the latter. 'With a longer business history, Hainan Huitong is better in the secondary share market,' he said. Last year, Hainan Huitong ranked 52th in total turnover traded at the Shenzhen stock exchange, recording 2.81 billion yuan worth of shares traded, according to the exchange 1994 fact book. GWS ranked 170th among the 621 members of the exchange in 1994, with 1.09 billion yuan worth of shares traded. Before the merger, SWS was 51 per cent owned by China Merchants Bank with Shenzhen Development Bank, China Everbright, Ping An Insurance Co of China and Tianji investment fund holding the remainder. It was given permission to operate by the Shenzhen branch of the People's Bank of China in December 1992, with approval from the bank given last month through the merger.