Citic, Credit Agricole to combine brokerage units

By Fabio Benedetti-Valentini (China Daily)
Updated: 2010-05-05 10:16
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PARIS - Citic Securities Co, China's largest brokerage by market value, and France's Credit Agricole SA are in exclusive talks to combine their global equity brokerage units and investment-banking operations in Asia.

The firms have signed a memorandum of understanding, they said in an e-mailed statement on Monday. As a first step, CLSA Asia-Pacific Markets, 65 percent owned by Paris-based Credit Agricole, would form a Chinese joint venture in investment banking and institutional brokering with Citic Securities.

Teaming up with Citic Securities, which has ranked first or second in China since 2006 in underwriting stock sales, will help CLSA leapfrog rivals including Goldman Sachs Group Inc in the world's fastest-growing major economy. Partnering with CLSA, rated Asia's best brokerage in Asiamoney's 2009 survey of institutional investors, may boost Citic Securities' expansion outside China.

"China is a big market, and Citic is already the leader in the industry," said Wang Xiaogang, a Shanghai-based analyst at Orient Securities Co, who has an "add" rating on Citic Securities stock. "The international market is a whole new playing field, and it's hard for Citic or other Chinese brokerages to expand beyond China."

Citic Securities fell by the 10 percent daily limit in Shanghai trading to 26.05 yuan ($3.82) as of 10:02 am on Tuesday. The stock had been suspended since April 16 pending an announcement. During that period, the Shanghai Composite Index slumped 9.3 percent. In Paris, Credit Agricole rose 2.2 percent on Monday.

The accord needs regulatory approval, the statement said.

CLSA, founded in 1986, has more than 1,350 employees and focuses on equity and economic research, trading and asset management. It also advises on stock sales and mergers. CLSA expanded its US operations and opened a business in Australia since early 2009. Management holds 35 percent of the brokerage.

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The firm's venture with Fortune Securities won regulatory approval in June 2008 to trade shares in China, whose stock market is the world's third largest by capitalization, according to Bloomberg data.

"CLSA has the premier global distribution network and Citic has a very powerful Chinese franchise," Jonathan Slone, chief executive officer of CLSA, said on Monday.

Citic Securities' planned $1 billion cross-investment with Bear Stearns Co fell apart in March 2008 as the Wall Street firm teetered on the brink of collapse and was forced to sell itself to JPMorgan Chase & Co.

Citic Securities' brokerage was 14th last year in trading shares and mutual funds in the country, according to the Securities Association of China. The ranking excludes its 60 percent stake in China Securities Co, which Citic has been ordered by the securities regulator to sell.

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