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SCMP Reporter

Beijing Peking University Founder Group, parent of red-chip Founder Holdings, has moved to take a controlling stake in troubled Zhejiang Securities, according to sources at the small south China brokerage.

Peking University Founder, also China's second-largest personal computer maker, is awaiting regulatory approval for the acquisition of a 51 per cent stake from the brokerage's largest shareholder, Zhejiang International Trust and Investment Corp (Zitic).

No price has been revealed.

The transaction, if approved, would be one of the first cases in which a mainland corporation has taken a controlling stake in a brokerage.

Existing brokerages usually have a scattered shareholding structure with mainland firms allowed to take up minority initial stakes for investment purposes. Zhejiang Securities, for example, has 40 shareholders.

A China Securities Regulatory Commission (CSRC) decision on the application was expected in days, a CSRC official said in Hangzhou yesterday.

Secretly, changes had already taken place at the Hangzhou-based brokerage.

'The transfer has not been formally completed,' a source within Zhejiang Securities said yesterday. But he added that a new chairman, Li Huaqiang, had been appointed last week.

Reuters yesterday quoted a Zhejiang Securities source as saying the new controlling shareholder planned to change the brokerage's name to Founder Securities.

Fourteen-year-old Zhejiang Securities has a registered capital of 450 million yuan (about HK$421 million). It had set up 15 branches in the country by the middle of last year. Its Web site said it booked profits of more than 300 million yuan in 2000.

Haitong Securities, China's most profitable brokerage last year with earnings of 1.02 billion yuan, plans to expand its registered capital to just over seven billion yuan to become the country's largest brokerage.

There is hope within Zhejiang Securities that a change in its controlling shareholder could help it regain a proprietary trading licence. The CSRC revoked the brokerage's proprietary trading right in December and slapped it with a hefty 503.1 million yuan fine.

Zhejiang Securities was accused of a host of offences between December 1998 and March last year, including misappropriating funds in clients' margin accounts, irregularities in proprietary trading to rig the stock price of Shanghai-listed pesticide maker Qianjiang Biology, and illegally helping clients raise funds for stock investments.

Separately, Zhejiang Securities was also implicated in the price-rigging scam at Shenzhen-listed China Venture Capital, China's most spectacular stock manipulation case so far.

Zhejiang Securities filed a lawsuit in the Beijing High Court earlier this year to appeal the CSRC's disciplinary actions.

The result of the case is unknown.



Red-chip parent takes brokerage stake