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China’s CIC Said to Back Shenyin & Wanguo Buying Hong Yuan

Nov. 1 (Bloomberg) -- China Investment Corp., the sovereign fund that holds the government’s stakes in banks and brokerages, gave its approval for Shenyin & Wanguo Securities Co. to buy Hong Yuan Securities Co., a person with direct knowledge of the matter said.

Hong Yuan said in September that Vice Chairman Hu Qiang and Vice President Zhou Dong were being investigated by Chinese police, without giving more details. That probe prompted the acquisition talks, said the person, who asked not to be identified because the matter is private. The brokerages are now seeking approval from regulators including the China Securities Regulatory Commission, the person said.

The transaction, which China Securities Journal and Caixin reported yesterday, would create China’s fifth-largest broker by assets, Securities Association of China data from 2012 show.

The acquisition would add to steps China has taken to weed out wrongdoing in financial markets. That campaign has included fining Ping An Securities Co. 76.7 million yuan ($12.6 million) for failed due diligence in an initial offering it underwrote and a yearlong freeze on domestic IPOs. It also coincides with President Xi Jinping’s campaign against official corruption, which he has said is a threat to Communist Party rule.

Calls to Shenyin & Wanguo’s media department went unanswered yesterday and today. CIC and Hong Yuan’s media departments didn’t respond to e-mails from Bloomberg News seeking comment.

China Galaxy

China Galaxy Securities Co., which this year raised about $1 billion in a share sale in Hong Kong, may merge with China Investment Securities Co., the Securities Times reported today, citing unidentified people.

The planned transactions are part of a reorganization of brokerage shareholdings at CIC’s Central Huijin Investment Ltd. unit, the newspaper said.

Shenyin & Wanguo’s Hong Kong-listed unit slipped 0.7 percent to HK$2.74 at 3:43 p.m., after jumping 7 percent to HK$2.76 yesterday, the biggest gain in four months. China Galaxy fell 0.2 percent to HK$5.27.

Trading of Hong Yuan’s shares was suspended starting Oct. 30, when the brokerage said it received notice from its controlling shareholder of a matter that could affect its stock price. China Investment Securities isn’t publicly traded.

Huijin owns 55 percent of Shenyin & Wanguo, according to Huijin’s website. China Jianyin Investment Ltd., which owns a 60 percent stake in Hong Yuan, is wholly owned by Huijin.

Galaxy Securities isn’t aware of the reported merger plans, an employee in the board secretary’s office said by phone, asking not to be identified in line with company policy. A woman who answered the phone at China Investment Securities declined to comment and said she couldn’t transfer a call to the press department.

To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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