The country's biggest life underwriter China Life Insurance Co, together with its group operation, bought 500 million shares in CITIC Securities Co for 4.65 billion yuan (US$581 million) yesterday, the latest move to integrate the banking, insurance and securities sectors.

 

The transaction, the largest stock investment deal in China's securities history, made CITIC Securities the country's biggest securities firm by net assets, which now exceed 10 billion yuan (US$1.25 billion).

 

China Life Insurance Co bought 350 million shares for 9.29 yuan (US$1.15) each, becoming CITIC Securities' second-largest shareholder after China CITIC Group Co; China Life Insurance (Group) Company is now the fifth-largest shareholder, the company said in a statement to the Hong Kong bourse yesterday.

 

"The strategic cooperation with China Life will not only enhance CITIC Securities' customer base but also strengthen the company's business innovation," said Fang Qingli, president of CITIC Securities.

 

Beijing-based CITIC Securities is widely seen as one of the nation's better performing brokerages. Its share price has almost tripled this year. However, the company needs cash to fund expansion and possible acquisitions of smaller rivals. The capital raised from this private placement would largely ease CITIC Securities' thirst for capital.

 

China has been prodding its healthiest brokerages to seek new revenue sources, shutting down the weakest or forcing them to merge in the hope of cleaning up the fragile sector amid efforts to develop its fledgling capital markets.

 

According to Yang Chao, chairman of China Life, the deal with CITIC Securities is just the first step. "We are also thinking about cooperation with CITIC Group in the future," Yang said.

 

CITIC Securities, the country's first broker to have floated shares, is an arm of state financial conglomerate CITIC Group, founded by former Chinese Vice-President Rong Yiren in 1979.

 

The parent company now controls a sprawling empire spanning media and real estate, including Hong Kong-based CITIC International Financial Holdings.

 

Yang has had in-depth communications with Wang Jun, chairman of CITIC Group, reaching consensus on many strategic issues.

 

"Our businesses are quite complementary," said Yang Chao. "And we have great scope for cooperation."

 

Yang declined to comment on whether China Life would take stakes in other financial institutions such as banks, fund management companies and trust companies.

 

(China Daily June 29, 2006)