(Yicai Global) Sept. 22 -- Internet giant Tencent Holdings Ltd. [HK:0700] recently said that it will take a stake in established investment bank China International Capital Corp. [HK:3908] (CICC) and has signed a strategic cooperation framework agreement with it for broad cooperation in the financial services field, prompting market speculation.
The partnership is not exclusive, an insider at CICC told Yicai Global. “Neither our business nor our partnership is exclusive,” he said.
CICC and Tencent said two days ago that they have inked a stock subscription agreement, under which Tencent will subscribe to over 200 million of CICC’s H-shares, representing 4.95 percent of the firm’s total issued shares.
Both companies’ shares rallied on the news yesterday, with CICC rising 18.19 percent, its biggest gain ever.
“Given that Sinolink Securities Co.’s [SHA:600109] collaboration with Tencent has yielded good results, CICC’s introduction of Tencent as a strategic investor will help it transform more quickly,” a marketing director at a medium-sized brokerage’s business department told Yicai Global.
Although Tencent has ample cash, it still needs to raise money and conduct capital operations such as outbound investment. As an established brokerage, CICC boasts rich resources at home and sophisticated experience doing business abroad, he said.
Brokers choose to work with internet titans such as Tencent to reach more clients, he said, adding that he does not expect them to rush into bed with brokers as they did with lenders before.
By taking shares in a leading domestic broker for the first time, Tencent can have indirect access to full license for a domestic brokerage to push into the financial services market, said Zheng Ping, an analyst with Minsheng Securities Co.
He believes that the direct goal of the partnership is to help CICC transform its wealth management business as Tencent’s involvement will help improve the brokerage industry’s technological ability.
Tencent participated in the capital raising and share-offering program of Jinzheng Wealth Nanjing Technology Co., a holding subsidiary of securities-related information technology provider Shenzhen Kingdom Sci-Tech Co. [SHA:600446], via a subsidiary to take an 8-percent stake in the firm just one day before it backed CICC. Jinzheng Wealth Nanjing Technology is mainly engaged in the fund and asset management-related IT business.Keywords: MSCI, investment, Fintech, CICC