A primary ingredient for China’s success is the relaxation of foreign investment access. China’s regulators made the first major moves to improve two-way connectivity of its capital markets and the rest of the world with initiatives linking the Hong Kong stock market with the Shanghai exchange in 2014, the Shenzhen exchange in 2016, and the Bond Connect scheme last year.
But regulation alone cannot link China with the rest of the world. It is vital the financial institutions support and embrace international connectivity by offering investors opportunities previously unavailable to them. To do that they must be truly international themselves, in bricks and mortar and in mindset.
Despite macroeconomic headwinds, there are Chinese financial institutions, including Huatai International, who are embracing internationalisation. As such, more and more investors across the globe are tapping Chinese assets.
A direct link to clients
So far so good, but more still needs be done to ensure clients are better connected to investing opportunities when they arise. The same financial institutions need to cut a clear path towards linking international investors with Chinese assets and vice versa.
Since its establishment in Hong Kong, Huatai International has been serving as Huatai Securities’ (HTSC) international business hub, overseeing both Hong Kong and US wealth management (AssetMark – see below) businesses. Huatai International’s total assets stood at Rmb19.3bn, with income of Rmb1.01bn achieved in the first half of 2018, an increase of 39.3% compared to the same period in 2017.
It’s seven main areas, across primary and secondary markets, comprise: Investment banking, private wealth management and retail brokerage, research and equity sales, fixed-income product sales and trading, cross-border and structured finance, equity derivatives and asset management.
According to Dealogic data, Huatai International ranked No.3 in terms of both the number of IPO sponsorships with fund-raising scale of more than $50 million and the total fund-raising volume in Hong Kong in the first half of 2018.
According to the interim financial reports for the half year of 2018, income generated from HTSC’s international business ranked fourth among the top 10 with international’s revenue accounting for 12.3% of HTSC’s total revenue, up 8.9% on the year before.
The following table shows the ranking of the top 10 international brokerage companies, according to the China Accounting Standards for Business:
Huatai International’s strategy shows promise for two key reasons: its access to a wealthy US private investor base and its improved connections with its parent company HTSC – allowing it to make good use of domestic and foreign links to lay out its cross-border business.
Locked in to the US opportunity
Huatai International’s key international move was made in 2016 when it completed the acquisition of AssetMark, a US financial technology company and ‘turnkey asset management project platform’, or TAMP. The acquisition provides HTSC’s a platform to connect investors to Chinese markets. Cerulli Associates has ranked it No.3 in terms of TAMP market share (9.7%) in the US.
Building an onshore presence in the US is now increasingly complicated to achieve, given the present tensions between China and the US. Under the policy of US President Trump, Chinese companies are less likely to acquire leading US companies for the time being. In this context, HTSC’s acquisition of AssetMark is prescient and accelerates the group’s internationalisation with a key investor market.
In fact, HTSC announced on August 30, 2018, the proposal to split AssetMark in the United States and maintain its control after the transaction is completed. If AssetMark completes its listing, HTSC will be the only brokerage firm with mainland A-shares, Hong Kong H-shares and US-listed platforms.
When looking to support China’s outbound economic strategy it is important to ensure you have the products and services that can attract global capital. It is equally important to have a secure route to that capital.