CITIC Securities’ offshore arm and CLSA have combined their corporate finance and capital markets business and added new teams in Australia and London to capture more of the burgeoning outbound Chinese investment and help foreign investors gain access to China.
The merger is another step in CITIC Securities’ integration of pan-Asian broker CLSA following the takeover in July 2013 which was predicated on China continuing to open up its capital markets meaning more business for financial intermediaries.
“Henceforth anything that CITIC Securities does outside of mainland China in ECM, DCM and M&A will be done via this entity,” CITIC CLSA’s head of corporate finance and capital markets Andrew Low told FinanceAsia in an interview.
Over 40 bankers at the Hong Kong-based international subsidiary of CITIC Securities, CITIC Securities International (CSI), have moved across town to work in the Hong Kong headquarters of CLSA in recent months. The majority of them shifted over the weekend. Branding of the corporate finance unit changed to CITIC CLSA and emails were updated.
Integration of the Asia-focused broker has been tenatative and gradual to avoid as much as possible culture clashes and resignations which have often beleaguered financial mergers such as the combination of Japanese broker Nomura with parts of Lehman Brothers.
“There are plenty of examples where those cross-cultural matches haven’t meshed – we’ve tried to do it differently, take our time and do it in a considered manner,” said Low.
As part of the integration, Changhong Wang joined CLSA in April from CITIC Securities, becoming a managing director head of China ECM and corporate finance, while Kathy Liu joined as head of DCM.
“The big revenue upside this year, and we’re already seeing it come through, is around DCM and M&A and geographies such as Australia where there are China-deal related opportunities that we are currently not capturing,” said Low who noted that CITIC CLSA has done five DCM deals in the first fiscal quarter.
It was not clear if and when the integration would expand to CLSA and CITIC Securities’ larger equity broking franchises said a spokeswoman.
Low said there have not been redundancies as part of the integration. Low joined CLSA at the end of January.
“It’s much more complimentary than duplicative. We’ve moved everyone in,” he said noting CLSA’s traditional strength in placements across Southeast Asia particularly Indonesia and the Philippines whereas the people in CSI have been China focused. “The combination has also given us critical mass in DCM and M&A.”
While CLSA shed about 25 equity brokers earlier this year Low said he continues to build his corporate finance platform. Over the past couple of months the former Macquarie banker has hired a team of eight in Australasia including head of investment banking Mark Dorney who joined from Grant Samuel, to capitalize on strong cross border flows from China into Australia. He hopes to augment the team to 10 people, allowing them to handle around a dozen mandates at a time.
Low has also added a team in London to help execute Chinese investment into Europe. There were more than 113 direct investment deals in 2014 versus 36 in 2010. France, Germany, Italy and the United Kingdom account for more than 60% of capital inflows from China.
CITIC CLSA now has a staff of 100, located in 10 offices in Hong Kong, Bangkok, Colombo, Jakarta, Manila, Kuala Lumpur, Mumbai, Singapore, Sydney as well as London.
Low has organized his sector coverage to mirror CITIC Securities’ structure on the mainland.
CITIC CLSA will cover consumer & diversified, energy, mining & equipment, financial institutions & sponsors, real estate & infrastructure and TMT & healthcare.
At the bankers' first offsite last month in Shenzhen bankers from CLSA, CSI and CITIC Securities sector specialists from around Asia and their mainland counterparts talked about potential cross border M&A deals. Senior management Wang Dongming, the chairman of Citic Securities, and Yin Ke vice chairman of CITIC Securities and chief executive officer of CITIC Securities International also lent their support at the offsite.
“We see enormous opportunity for growth across the region and China’s One Belt, One Road is one initiative we can leverage immediately,” said Yin Ke.
As integration continues apace some investors have worried that it would compromise the integrity of CLSA’s research and advice on equity investments.
Low said that a deal committee continues to rule on which mandates, comprised of investor-facing sales and research people as well as issuer relationship managers, are accepted.
“This will not compromise CLSA’s commitment to critical analysis of companies, markets and trends. CLSA will continue to be a research-driven equity broker and CITIC CLSA Securities will leverage that research to assist corporates to grow,” said CLSA Chairman & CEO and CITIC Securities International Co-CEO Jonathan Slone in a statement.