China developer Greenland sets up securities unit in Hong Kong

PUBLISHED : Tuesday, 20 September, 2016, 10:10pm
UPDATED : Tuesday, 20 September, 2016, 10:55pm

Shanghai-based Greenland Holding Group, one of China’s three largest developers, quickened its pace of diversification after the company launched its first securities affiliate to pursue fast growth in the financial sector.

Geng Jing, chief executive of Greenland Financial, said on Tuesday that the establishment of the securities subsidiary was part of the effort to make financial services one of the developer’s three core businesses, alongside the consumer and construction segments.

“Greenland is adamant in developing financial services which will generate one-third of the group’s total profits,” he said. “In the face of a severe slowdown, large-size companies in any industry would feel it is necessary to diversify into finance. It is a high-risk business, but it could generate high returns.”

Greenland’s setting-up of the Hong Kong-based securities firm, Greenland (Asia) Securities, would likely open a floodgate for more investments or acquisitions by the giant developer to tap the banking, insurance and securities businesses.

Greenland (Asia) will initially offer advisory and asset management services in Hong Kong, with a plan to have US$10 billion asset under management in three years.

The company will also apply for investment banking and brokerage licences in Hong Kong to reinforce the growth of the firm.

Geng, who is also a vice president of Greenland Group, said the company is still pursuing a brokerage licence on the mainland as it envisions tapping the rising wealth management demand from mainlanders.

“We could either seek to set up a new brokerage or acquire an existing one,” he said. “We will find a proper region to locate the mainland securities firm.”

The mainland securities regulator started vetting applications for joint-venture brokerages last year, allowing Hong Kong and Macau investors to establish securities firms with a full range of licences.

Those applicants based in poverty-stricken areas could also be given a fast ticket to the full range of licences as the authorities want to support fund raising by local firms.

Geng said Greenland would closely study the new policies to find a proper way to set up its own A-share brokerages at the right time.

“Securities is still believed to be one of the lucrative industries in which mainland corporate giants are keen on making investments,” said Bob Zhou, chief executive of Shanghai-based Yinshu Capital. “Greenland needs to attract more talented professionals to boost its diversification into finance.”

Greenland became globally renowned for its massive overseas property investment.

But the company saw its credit rating downgraded this year due to its high leverage in the property sector.

In a sluggish economy, commercial properties could face a low occupancy ratio or decreasing rents, resulting in a developer’s cash strain.

In July, Greenland announced it would turn multi-million square metres of its commercial properties into incubators for technology start-ups in line with the central government’s call to fuel the slowing economy with entrepreneurial vigour.

Greenland founded its finance division in 2011, taking the first step in exploring financial businesses.

Greenland Financial posted a profit of 3 billion yuan in 2015, a year-on-year jump of 862.8 per cent.

For this year’s first half, Greenland Financial reported profits of 2 billion yuan.