China Jianyin Investment Securities (CJIS) opened Wednesday in south China's Shenzhen City based on the quality assets of the bankrupt China Southern Securities, once the country's fifth-largest broker.

The new securities house, solely owned by China Jianyin Investment (JIC), was approved by the market watchdog China Securities Regulatory Commission recently and registered in Shenzhen with a registration capital of 1.5 billion yuan (US$ 185 million), including the quality assets JIC bought from China Southern Securities.

The parent company JIC, acquired these securities assets of 314 million yuan (US$38.3 million) from the bankrupt China Southern Securities in a bid in early August and injected them into the new brokerage.

The assets include Southern Securities' 74 nationwide retail branches and operations for investment banking and asset management.

In return, JIC had to pay 8 billion yuan (US$ US$942 million) to the central bank for Southern Securities, which loaned the money early last year to pay its clients due to its misappropriations.

High officials of JIC took the top positions of the new brokerage.

Yang Xiaoyang, vice-president of JIC who was responsible for restructuring Southern Securities, was appointed as board director.

He said in the opening ceremony that the new management team would improve the internal governance, optimize resource allocation and adopt a rational risk control system to transform the company into a competitive modern investment bank.

Wang Jianxi, board director of JIC, said on a previous occasion that JIC should work as a strategic institution to consolidate the assets of the securities houses in China.

JIC is a spin off from the China Construction Bank designed to take charge of the State-owned lender's non-banking business, which holds a 43.35 percent stake of a leading investment company China International Capital Corporation.

Market observers said the establishment of the new company represents a successful trial in optimizing China's stagnant securities houses.

Most of China's brokers are performing poorly and the brokerage market needs a fundamental reshuffle. Ninety percent of the mainland's brokers reported a combined loss of more than 15 billion yuan (US$1.84 billion) last year, according to the China Securities Association.

The regulator had been reshuffling the brokerage industry by closing down poor performers, encouraging mergers and acquisitions and even inviting foreign strategic investors.

In addition to JIC, China Central Huijin, another investment arm of the central bank, and CITIC Securities also worked as main domestic forces of market consolidation.

Yesterday, UBS also announced to invest up to 1.7 billion yuan (US$210 million) in State-owned Beijing Securities in return for its 20 percent equity stake in the restructuring operation.

The restructuring proposal, approved by the State Council, would see the new securities company providing - among other services - domestic debt and equity underwriting in China. Additionally, and distinct from other Sino-foreign joint ventures, the new company would be able to conduct secondary trading and distribution in both equity and debt markets and domestic wealth management services in China, according to UBS.

(China Daily September 29, 2005)