China’s soaring stock market is pushing the nation’s largest securities firm into expansion mode.
Citic Securities Co. is in talks to acquire overseas foreign-exchange brokers, and has revived a plan to boost the number of its mergers and acquisitions bankers globally to at least 100 from 80, Beijing-based M&A head Zhang Jian said Thursday in a phone interview.
Citic needs more bankers because Chinese firms’ surging market valuations are fueling their appetites for purchases abroad. Adding foreign-exchange expertise could broaden Citic’s appeal as an international investment bank and help it make the most of the yuan’s increasing global role. Acquisitions would help the company to expand in Asia, the U.S. and Europe, Zhang said, without giving details of any talks.
Citic ranked second among advisers on acquisitions involving Chinese companies last year, working on $51.4 billion of deals, down from the No. 1 spot in 2013, according to data compiled by Bloomberg. China International Capital Corp. was the busiest adviser last year, the data show.
China’s domestic and outbound M&A is set to rise to a record this year and, thanks to a “sizzling” stock market, the brokerage is willing to pay generously for the extra bankers needed, Zhang, 37, said. At least 20 people will be added, he said.
In the securities firm’s most recent deal, it agreed in January to pay HK$780 million ($100 million) to buy 60 percent of KVB Kunlun Financial Group Ltd. Citic bought a 19.9 percent stake in CLSA Ltd. in 2012 for $310.3 million and paid $841.7 million for the remainder of the firm in August 2013, excluding its Taiwan operations.
Chinese brokers are looking abroad as they benefit from the boom that has seen the Shanghai Composite Index more than double over the past year. A unit of Haitong Securities Co. agreed in December to buy Portuguese investment bank Banco Espirito Santo de Investimento SA.
Asked about an interview in March last year where he talked of boosting the mergers and acquisition team to 100 from 80, Zhang said Thursday that the number had instead stayed little changed as some staff left and others worked extended hours. Numbers must rise now because staff are already stretched, Zhang said, he’s anticipating eight to 10 major deals involving Chinese companies this year, about double last year’s total.
In China, Zhang expects deals in infrastructure, telecommunications, and in industries with overcapacity such as steel and cement, as well as those related to China’s “One Road, One Belt” development strategy, he said.
The banker was dismissive of any threat posed by foreign banks as China considers loosening limits on their roles in the nation’s securities industry.
“I don’t think that’s a challenge -- we’ve been competing with foreign investment banks for the past 10 years and we were always able to be in the lead,” said Zhang. “Whenever there was a crisis, those foreign players would turn conservative and cautious toward the Chinese market, and even retreat.”
— With assistance by Jun Luo, and Amy Li