China Investment Corp., the sovereign fund that holds the government’s stakes in banks and brokerages, gave its approval for Shenyin & Wanguo (218) Securities Co. to buy Hong Yuan Securities Co. (000562), a person with direct knowledge of the matter said.
Hong Yuan said in September that Vice Chairman Hu Qiang and Vice President Zhou Dong were being investigated by Chinese police, without giving more details. That probe prompted the acquisition talks, said the person, who asked not to be identified because the matter is private. The brokerages are now seeking approval from regulators including the China Securities Regulatory Commission, the person said.
The China Securities Journal and Caixin magazine reported on the transaction earlier today.
The acquisition would add to steps China has taken to weed out wrongdoing in financial markets. That campaign has included fining Ping An Securities Co. 76.7 million yuan ($12.6 million) for failed due diligence in an initial offering it underwrote and a yearlong freeze on domestic IPOs. It also coincides with President Xi Jinping’s campaign against official corruption, which he’s said is a threat to Communist Party rule.
Central Huijin Investment Ltd., a unit of CIC, owns 55 percent of Shenyin & Wanguo, according to Huijin’s website. China Jianyin Investment Ltd., which owns a 60 percent stake in Hong Yuan, is wholly-owned by Huijin.
Shenyin & Wanguo’s Hong Kong-listed unit rose 7 percent to HK$2.76 today, the biggest gain in four months. Trading of Hong Yuan’s shares was suspended starting yesterday, when the brokerage said it received notice from its controlling shareholder of a matter that could affect its stock price.
Calls to Shenyin & Wanguo’s media department went unanswered today. CIC and Hong Yuan’s media departments didn’t respond to e-mails from Bloomberg News seeking comment.
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