Chinese state-owned brokerage to ramp up investment banking business in Southeast Asia

By Yantoultra Ngui

SINGAPORE (Reuters) – A unit of state-owned brokerage China Galaxy Securities (CGS) plans to expand its investment banking team in Southeast Asia to 50 people next year from 30 now, a senior executive said, betting on a rise in dealmaking in the region amid a sluggish market at home.

CGS International Securities is also in the process of securing a license to help manage initial public offerings (IPOs) in Malaysia, said Jason Saw, its group head of investment banking.

Singapore-headquartered CGS International has over the last 1-1/2 years obtained investment banking business licenses in Indonesia, Malaysia, Singapore and Thailand, Saw told Reuters in an interview.

“The new people that we are onboarding are actually more to build our ASEAN-China relation to cater to Chinese enterprises to go into Southeast Asia,” he added.

Saw said that by leveraging on its parents CGS and China Investment Corp, CGS International is targeting deals revolving around China-Southeast Asia relations, dual listings, and mid-market deals valued at 200 million Singapore dollars ($149 million) to 1 billion Singapore dollar ($744 million) in Southeast Asia.

CGS International, whose parent CGS is a subsidiary of sovereign wealth fund China Investment Corp, is seeing growing interest from Chinese strategic investors and funds that want to invest into Southeast Asia to expand and diversify, Saw said.

Weaker capital markets and dealmaking activities in mainland China and Hong Kong due to a slowing Chinese economy and rising geopolitical tensions have prompted some Chinese financial services groups to expand into Southeast Asia.

Total deals value in China dropped 25% in the first half of this year to $108 billion, the lowest since the same period of 2012, LSEG data showed，while globally merger and acquisition activities rose 16%.

There’s unlikely to be a turnaround in the trend in the near future, with official data on Monday showing China’s economy posted a growth of 4.7% in the second quarter, which was below expectations of 5.1% and Beijing’s broader goal of around 5%.

China’s outbound investments into Southeast Asian nations, on the other hand, rose 27% in 2023 from a year earlier, according to a report from the Griffith University, with Indonesia being the top recipient.

China International Capital Corp said earlier this month it plans to open offices in Indonesia and Malaysia.

Besides investment banking, CGS International offers a full range of financial services from wealth management to shariah-compliant financing and structured products and prime brokerage services in over 15 countries, its website showed.

CGS International already has asset management licenses in Singapore, Malaysia and Thailand, according to Saw, and the firm is interested in Vietnam, but will work with “established partners” there for the time being.

The firm was rebranded from CGS-CIMB Securities in April this year after its parent in 2023 took full ownership of the joint venture, which was formed with Malaysia’s second largest lender CIMB Group in 2018.

($1 = 1.3442 Singapore dollars)