30th May 2024

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Business Industry and Financial

Chinese investment firms CICC and China Galaxy firmly deny merger rumours

Two of China’s leading investment banks and brokerages on Monday denied talk swirling in the market about a proposed merger between the two entities.

Both companies said they have not received any written or verbal information from any government department, regulatory authority or controlling shareholder with regard to the market talk on the “merger and reorganisation”.

CICC and CGS, both of which are controlled by sovereign wealth fund Central Huijin Investment, said in their respective statements that their controlling shareholder has no plans to merge the two companies.
China Galaxy Securities is the fourth-largest brokerage in mainland China. Photo: AFP

CICC is China’s second-biggest investment bank and eighth-largest brokerage in terms of revenue, while CGS ranks 18th and fourth respectively, according to data compiled by Chinese media.

The merger talk comes soon after CICC appointed former CGS chief executive Chen Liang as its chairman last month.

The rumours of an impending merger gathered steam after China’s financial regulators pledged to “cultivate top-tier investment banks and investment institutions” at last month’s central financial work conference, which was renamed from the national financial work conference to highlight direct supervision by the Communist Party.

Following the work conference, market regulator China Securities Regulatory Commission (CSRC) said it would support the mandate by helping top investment and brokerage firms with potential mergers and reorganisations to improve their operations. This would also help bolster and stabilise the real economy, the CSRC said.

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Central Huijin, the domestic investment arm of China’s US$1.35 trillion sovereign wealth fund, has undertaken many measures in recent months to support the country’s financial institutions and shore up confidence in its stock market.

On October 23, Central Huijin bought exchange-traded funds (ETFs) tracking underlying Chinese stocks, and said it would continue to increase such investments in the future, according to a one-sentence statement on its website.

This was the third time that Central Huijin had made ETF investments in its history, with the previous interventions taking place in June 20, 2013 and July 5, 2015, according to CICC.

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Two weeks earlier, the sovereign wealth fund increased its stake in China’s big four state-owned banks with an investment of 477 million yuan (US$65.4 million), and promised to continue to buy over the next six months. This marked Central Huijin’s first purchase since August 2015, when China’s stock market experienced a sharp market correction.

Shares of CGS fell as much as 1.2 per cent in early trading in Hong Kong before erasing losses to trade nearly 1 per cent higher at HK$4.29 at the close. CICC jumped 1.5 per cent to HK$13.34.

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