(Yicai Global) Aug. 7 -- Alibaba Group Holding, one of China's leading New Economy giants, has paid CNY3.5 billion (USD512 million) for a stake in a state-owned securities firm as it looks to cement its place in the financial sector.
The Hangzhou-based firm picked up a 3.25 percent share in Huatai Securities for its contribution to a CNY14.2 billion private placement, the fundraiser said in filings to the Hong Kong and Shanghai bourses on Aug. 3. Alibaba's retail partner Suning.Com also claimed a 3.15 percent stake while four other investors chipped in.
Alibaba's investment follows a similar move by rival Tencent, which bought a stake in China International Capital in September and has long worked with other brokerages, including Sinolink Securities.
Whether or not these tech-brokerage combinations will prove effective depends on regulation, an anonymous insider told Yicai Global. He believes the sector is about to undergo more changes and that they will be beneficial to larger firms.
Huatai was the biggest securities brokerage in China last year with a more than 7.5 percent market share, according to a national ranking. CITIC Securities, the country's largest full service investment bank, captured a 5 percent share.
When New Economy firms first began investing in the financial sector, they targeted smaller companies, but are pushing for more developed targets as regulators tighten management of brokerage licenses. By investing in bigger firms, the tech titans need not worry about buying licenses or taking full control of their targets, a non-banking financial analyst at a brokerage in Guangzhou told Yicai Global.
This will make the top players even more competitive as the securities sector recovers, the source added, giving a nod to Huatai's stable market share and CICC's wealth of high-end clients.
A senior executive at a brokerage in neighboring Shenzhen believes that regulators will bring in pre-emptive controls to better manage tech firms looking to make larger investments in the industry. These internet firms are still just laying out plans, he added, saying that it will be difficult for them to become disruptors as authorities will govern the speed of change and limit the number of exclusive linkups with brokers.
Editor: James Boynton