Chinese companies are snapping up small brokerages in Hong Kong to establish a foothold in the city before a much-anticipated cross-border stock trading scheme kicks off this year.
Six Hong Kong brokerage and fund firms have announced deals this year, and one transaction, involving Shanghai conglomerate Fosun International Ltd., has been completed, the Wall Street Journal reported. Two others are awaiting Hong Kong regulatory approval and another three are being negotiated.
In the previous three years combined, just two Hong Kong brokerages were acquired by Chinese firms, the report said, citing data from Dealogic.
The Shanghai-Hong Kong Stock Connect Scheme is expected to start this year, opening access to US$2 trillion worth of Chinese stocks in Shanghai, while allowing mainland investors to buy into Hong Kong, the newspaper said, quoting analysts.
By acquiring Hong Kong brokerages, Chinese firms can attract Hong Kong clients to invest in mainland stocks, Jeffrey Chan, chairman of the Hong Kong Securities Association, was quoted as saying.
Unlike in Shanghai, Hong Kong’s capital markets are open to anyone with a Hong Kong brokerage account, and such accounts are not restricted to Hong Kong citizens.
Fosun recently bought Hani Securities (HK) Ltd., a retail brokerage with around 2,500 active clients. Fosun said the acquisition will give it both a foothold in Hong Kong and a base from which to set up a fund-management company.
Stock brokerages in Hong Kong, including foreign firms, reported a combined net profit of HK$4.5 billion (US$581 million) in the first half of this year, up 41 per cent from the second half of 2013, the newspaper said, citing data from the Securities and Futures Commission.
Trading volume by brokers rose 7 per cent to US$2.57 trillion over the same period, it added.
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