China Merchants Securities Co Ltd, one of the country's biggest brokerages by assets, has obtained official overseas securities brokerage license in South Korea, making it the first mainland securities company to get the green light.
The license was approved by South Korea's Financial Services Commission on June 29 and three days later the Chinese mainland opened Bond Connect with Hong Kong, the long-awaited platform that allows qualified overseas investors to access mainland interbank bond markets without a quota limitation.
Analysts said that as a result, the Shanghai and Hong Kong-listed brokerage could expand its current services as an information consultant to selling derivatives and bonds from the mainland and Hong Kong markets to South Korea's institutional investors.
The financial services commission said it hoped the Chinese broker would become a bridge between the two countries' financial markets, further expanding their M&A deals, bonds issuance, IPOs and other investment bank activities in the future.
Shenzhen-based China Merchants Securities said South Korea's investments into China's A-share market has been increasing gradually since the opening of Shanghai-Hong Kong and Shenzhen-Hong Kong stock connects.
The Chinese broker has to date been providing trading platforms and market reports to South Korea's securities brokers, and it stressed that its branch would continue to work with the local firms, rather than compete with them, after obtaining the license.
China Merchants Securities said it expected the current exchanges would continue to expand after the opening of the bond connect, as some securities agencies and asset management companies in South Korea were already in talks with it to jointly develop more diversified investment products.
Luo Dongyuan, the head of trade and investment business at Guotai Junan Securities, said he believed the active efforts by Chinese securities companies to develop new business under the bond connect would speed up the pace of their internationalization.
He said that securities brokerages had previously used M&As to go abroad, but after the start of the connect they could now participant directly in global trading.
Qian Yujun, chairman of UBS's China strategy committee, said both Chinese and foreign securities agencies could benefit from the bond connect and they would play a significant role in future market making.