(Yicai) Oct. 10 -- Shares of Guotai Junan and Haitong Securities jumped after the two Chinese securities giant planning to merge into the industry’s largest brokerage firm set the ratio for their share swap.

Guotai [SHA: 601211] and Haitong [SHA: 600837] surged by the 10 percent exchange-imposed daily trading limit to CNY16.17 (USD2.29) and CNY9.65 (USD1.37), respectively, as of 1.25 p.m. in Shanghai today. In Hong Kong, their shares [HKG: 2611; HKG: 6837] rallied 63.7 percent and 95.5 percent to HKD12.94 (USD1.66) and HKD7.09 (91 US cents), respectively.

The stocks suspended trading on Sept. 6 and resumed today, skipping the capital market frenzy that started on Sept. 24 when the Chinese government introduced new measures to buoy economic growth.

Guotai will issue A-shares and H-shares, those traded in the Chinese mainland and Hong Kong, to all Haitong shareholders at a ratio of 0.62 to 1, the two Shanghai-based companies announced yesterday. After the merger, Haitong will be delisted from the Shanghai and Hong Kong stock exchanges.

The new entity resulting from the Guotai-Haitong merger, which still does not have an official name, would have total assets of about CNY1.68 trillion (USD237.1 billion) and total net assets of CNY330 billion (USD46.6 billion), based on figures reported in their 2023 earnings reports. That would place it ahead of Citic Securities as China’s largest brokerage.

The merger will create a world-class investment bank in Shanghai that will benefit from the city’s international financial center status, an industry insider told Yicai. It will also enable the sharing of professional capabilities and client resources, enhance customer service, and improve operational efficiency, the insider added.

Guotai also plans to issue additional 626 million shares at CNY15.97 apiece to Shanghai State-Owned Assets Operation, an affiliate firm of its largest shareholder Shanghai International Group, for CNY10 billion (USD1.4 billion) to replenish work capital, repay debts, and raise funds for the merger.

After the merger and private placement, SIG and its affiliates will see their combined stake in Guotai fall to 20.4 percent from 33.4 percent, remaining the largest shareholders. SIG is a financial asset management platform under the Shanghai municipal government.

Haitong has no actual controller, but its largest shareholder is Shanghai Guosheng Group, a state-owned capital operation platform also under the Shanghai government.

Editors: Tang Shihua, Futura Costaglione