China to merge 2 brokerages, forming $293b mega entity

China is combining two of its largest state-backed brokerages to create a new behemoth as it seeks to consolidate the US$1.7 trillion (S$2.2 trillion) sector and build stronger investment banks to compete with overseas financial firms.

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Guotai Junan Securities will merge with smaller rival Haitong Securities through a share swap, according to statements from both companies on Sept 5. The combination of the brokerages, both partly owned by Shanghai's state assets administrator, will create a new entity with assets of 1.6 trillion yuan (S$293 billion), topping Citic Securities as the largest brokerage.

The merger is pending approval from the companies' boards and shareholders, as well as the regulatory authorities.

The deal comes a year after Chinese President Xi Jinping urged regulators at a finance conference to cultivate a few top-ranked investment banks to compete with Wall Street firms expanding in China.