Chinese brokerage Guolian Securities gains most in 4 years on acquisition plan as wave of reform encourages consolidation

Guolian plans to buy a 95.48 per cent stake in unlisted Minsheng Securities after signing an agreement with the target’s shareholders on Thursday

Sector’s shares rise as analysts forecast more consolidation amid the government’s plan to nurture world-class brokerages

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Acquisition is expected to make Guolian Securities a top 20 brokerage in mainland China. Photo: Shutterstock

Published: 4:35pm, 26 Apr 2024Updated: 4:39pm, 26 Apr 2024

Chinese brokerage Guolian Securities jumped by the most in almost four years in Hong Kong trading after unveiling a plan to acquire a majority stake in a smaller rival, foreshadowing an increase in industry consolidation after the Chinese regulator pledged to cultivate more top-tier investment banks.

Shares of the Wuxi, Jiangsu province-based brokerage surged 25 per cent to HK$3.69 on Friday, capping its best single-day performance since September 2020. Trading in the company’s yuan-traded stock was halted in Shanghai before closing 1.2 per cent lower at 10.46 yuan.

Guolian plans to buy a 95.48 per cent stake in unlisted Minsheng Securities after signing an agreement with 45 shareholders of the target on Thursday, according to an exchange statement. Guolian will sell new yuan-denominated shares to fund the acquisition, and trading in the company’s onshore stock is expected to resume in no more than 10 days, it said, giving no further details.

The deal marks the first merger in China’s 11 trillion yuan (US$1.52 trillion) brokerage industry after the securities watchdog announced its intent to nurture investment banks that can rival global leaders Goldman Sachs and Morgan Stanley over the next decade.

A Minsheng Securities office is seen in a photo from the company’s Weibo account. Photo: Weibo

Meanwhile, top policymakers have also been giving more attention to the nation’s US$9 trillion stock market, which has stabilised after a three-year downtrend. The State Council this month issued a rare guideline document that outlines a reform path for the capital market through the middle of the century.