CITIC Securities has secured the approval of its shareholders to set up a securities brokerage and an asset management company with China Jianyin, one of the central bank's two investment vehicles focusing solely on equity investments in financial institutions.

The announcement came in the form of a declaration made by the former to the Shanghai Stock Exchange yesterday.

CITIC Jianyin Securities would have a registered capital of 2.7 billion yuan (US$333 million) with CITIC Securities taking 60 percent by investing 1.62 billion yuan (US$200 million) and Jianyin holding the remaining 40 percent by injecting 1.08 billion yuan (US$133 million).

The new brokerage will take over the securities business and assets of debt-ridden China Securities, according to agreement reached between the three companies in June.

Moreover, CITIC Jianyin will hold a universal licence for underwriting, brokering and proprietary trading.

However, the new brokerage would not pose a threat to CITIC Securities, one of the leading domestic brokers, said Xu Gang, the research department manager of the broker.

The two will work together under the CITIC brand; and, at the right time, the securities business of the two brokers will be consolidated, he added.

Meanwhile, CITIC Securities and Jianyin will jointly establish an asset management company under the name Jianyin CITIC Asset Management Corp. The new company will receive 70 percent of its registered capital, 1.33 billion yuan (US$164 million), from Jianyin and the remaining 30 percent of 570 million yuan (US$70.4 million) from CITIC Securities.

The company will take over the non-securities business of China Securities.

In addition, Jianyin has got the approval of the China Securities Regulatory Commission (CSRC) to set up a securities brokerage on its own with an investment of 1.5 billion yuan (US$185 million), according to a report in yesterday's Securities Times.

Part of the new broker's fixed assets worth about 300 million (US$27 billion) will come from Southern Securities, an industry heavyweight which was taken over by Jianjin last month.

The CSRC has been making concerted efforts to restructure the country's brokerage sector, which is in the red for the fourth consecutive year due to the market slump and poor risk controls.

Last year, China's 114 securities companies registered a combined loss of more than US$1.84 billion. And in the first half, 40 percent of China's inter-bank member brokers recorded a loss of US$123 million.

Only half of the country's 130-odd brokers are necessary for the industry to function well and the rest should be taken over or merged, said Yi Xianrong, a prominent finance expert at the Chinese Academy of Social Sciences.

(China Daily September 14, 2005)