Property Losses Expedite Merger of China’s Top Securities Firms
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A Haitong Securities office in Urumqi, Northwest China’s Xinjiang Uyghur autonomous region. Photo: VCG
The merger of two of China’s top securities brokerages is being expedited due to Haitong Securities Co. Ltd.’s (600837.SH) plunging profit and its subsidiaries’ eye-watering losses and risks, sources close to the firms told Caixin.
Earlier this month, Haitong and Guotai Junan Securities Co. Ltd. (601211.SH), both backed by Shanghai government-owned entities, announced their agreement to merge. Trading in their shares has been suspended ahead of Guotai Junan issuing new shares to Haitong shareholders in Shanghai and Hong Kong, stock exchange filings showed.
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- Haitong Securities and Guotai Junan, both Shanghai government-backed brokerages, are merging due to Haitong's significant profit decline and losses.
- Haitong's profit dropped 84.6% in 2023 to 1 billion yuan ($142 million), and its subsidiary, Haitong International, faced heavy losses and delisting.
- The merger aims to support Haitong with a preliminary plan post-National Day holiday, making the combined entity China’s largest securities firm by assets.
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Who’s Who
- Haitong Securities Co. Ltd.
- Haitong Securities Co. Ltd. (600837.SH) is experiencing a significant profit decline, with a 2023 profit down 84.6% to 1 billion yuan and a 75.1% year-on-year drop in the first half of this year. Its subsidiary, Haitong International, delisted from Hong Kong in January following substantial losses. The Shanghai government is expediting its merger with Guotai Junan Securities to support Haitong, creating China's largest securities company by assets.
- Guotai Junan Securities Co. Ltd.
- Guotai Junan Securities Co. Ltd. (601211.SH), backed by Shanghai government-owned entities, is set to merge with Haitong Securities Co. Ltd. to create China's largest securities company by assets. The Shanghai authorities are expediting the merger to support the struggling Haitong. Guotai Junan will issue new shares to Haitong shareholders in Shanghai and Hong Kong. This deal has halted trading in their shares temporarily.
- Haitong International Securities Group Ltd.
- Haitong International Securities Group Ltd., a once top-performing subsidiary of Haitong Securities, was delisted from Hong Kong’s exchange in January 2023 following significant financial losses. These losses were primarily due to investments in Chinese property developers’ offshore dollar bonds, amounting to HK$3.4 billion in 2022 and expanding to a HK$6.5 billion net loss. This financial turmoil contributed to the overall decline of Haitong Securities.
- Haitong Unitrust International Financial Leasing Co. Ltd.
- Haitong Unitrust International Financial Leasing Co. Ltd., 85%-owned by Haitong, is a top-earning subsidiary. It made 1.6 billion yuan in profit for 2023 and 812 million yuan in the first half of 2024. However, many of its clients are involved in the struggling real estate and infrastructure sectors, posing potential default risks.
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What Happened When
- January 2024：
- Haitong International Securities Group Ltd. was delisted from Hong Kong’s exchange following heavy losses.
- March 2024：
- Haitong International's 2023 loss expanded 29% year-on-year, according to the parent company’s latest annual report released.
- Earlier this month (September 2024)：
- Haitong Securities Co. Ltd. and Guotai Junan Securities Co. Ltd. announced their agreement to merge.
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