Tencent's stake purchase boosts CICC shares

China International Capital Corp securities brokerage branch in Beijing has been reducing its dependence on volatile investment banking fees and expanding its business catering to rich individuals.
China International Capital Corp securities brokerage branch in Beijing has been reducing its dependence on volatile investment banking fees and expanding its business catering to rich individuals.PHOTO: BLOOMBERG

BEIJING • Tencent Holdings, China's largest social media firm, is entering the traditional finance industry by investing in China International Capital, a move that may help the investment bank's expansion in wealth management.

Shares of CICC jumped by a record after it said Tencent is paying HK$2.9 billion (S$502 million) for roughly 5 per cent of China's oldest investment bank. The companies will team up on marketing and data analysis, according to an exchange filing.

CICC, once dubbed the Goldman Sachs of China after it brought some of the country's largest state-run firms to market, has been reducing its dependence on volatile investment banking fees and expanding its business catering to rich individuals. It completed a US$2.5 billion (S$3.4 billion) purchase of China Investment Securities this year, plunging into the retail investor market.

"Investors are buying into the fintech concept," said analyst at China Galaxy Securities Chi Man Wong. CICC gained wealthy clients through the acquisition of China Investment, and Tencent's investment "gives the firm lots of room to play with big data and financial technology".

Tencent, which operates the WeChat social media service, is buying 207.5 million new Hong Kong-listed shares for HK$13.80 apiece, CICC said. That is an 11 per cent discount to CICC's Wednesday closing price in Hong Kong, and translates into about 4.95 per cent of its total shares once new stock is issued. 

Shares of CICC surged as much as 19 per cent to HK$18.48 and traded 16 per cent higher at 11.59am in Hong Kong. Tencent was little changed. 

Cooperation with Tencent in areas such as precision marketing and big-data analysis "will enable the company to enlarge its customer base and provide more personalised and diversified wealth management products and services for customers", CICC said.

Set up in 1995, CICC was part-owned by New York-based Morgan Stanley until 2010. Its shares were listed in Hong Kong in 2015. The brokerage reported a 46 per cent jump in wealth management revenue in the first half, while investment banking sales remained flat.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on September 23, 2017, with the headline 'Tencent's stake purchase boosts CICC shares'. Print Edition | Subscribe