(Yicai) Nov. 22 -- Chinese brokerage titans Guotai Junan Securities and Haitong Securities have received regulatory approval for their proposed merger.

Shanghai’s state-owned assets manager signed off on Guotai Junan’s absorption of Haitong on Nov. 19, the Shanghai-based firms said yesterday, after China’s market regulator decided on Nov. 18 that no further review would be conducted on antitrust filings in relation to the merger.

The pair proposed the union, which will create China’s biggest securities company, in early September and disclosed the terms early last month. Guotai Junan, the larger of the two, will issue A-shares and H-shares, those traded in the Chinese mainland and Hong Kong, to Haitong’s shareholders at a ratio of 0.62 to 1. Haitong will be delisted.

The merged firm will have assets of CNY1.68 trillion (USD237.1 billion) and net assets of CNY330 billion (USD46.6 billion), based on figures in their 2023 earnings reports, placing it ahead of Citic Securities as China’s largest brokerage.

Guotai Junan also plans to issue an additional 626 million shares at CNY15.97 (USD2.97) apiece to Shanghai State-Owned Assets Operation, an affiliate of its largest investor Shanghai International Group, raising CNY10 billion (USD1.38 billion). Up to CNY3 billion will go to each of the new entity's international expansion, trading investment operations, and working capital. The rest is earmarked for digital transformation initiatives.

According to the proposal, the new entity will enhance its trading and investment operations by expanding the equity, FICC (fixed income, currencies, and commodities), and derivative businesses, increasing market-making activities for options on Shanghai’s Star Market and Star 50 Exchange-Traded Funds, and innovating carbon finance trading and carbon repurchase services.

For digital transformation, the firm will focus on developing investment banking digital platforms, securities industry-specific large language models, and upgrading core trading systems.

Against the backdrop of a decline in Chinese stock markets today, Guotai Junan’s shares [SHA: 601211] closed 3.5 percent lower at CNY19.12 (USD2.64) in Shanghai, while its Hong Kong-listed stock [HKG: 2611] fell 1.4 percent to HKD11.72 (USD1.51). Haitong [SHA: 600837/HKG: 6837] dropped 3.5 percent to CNY11.32 and 3 percent to HKD6.79.

Editor: Futura Costaglione