China’s CICC fends off Wall Street with hiring, takeovers

Bloomberg

As global banks make inroads into China’s $15 trillion asset management market, China International Capital Corp is launching a counter-offensive spanning from overseas acquisitions to hiring.
CICC is searching for potential targets among medium-sized, Asia-focused managers including stock houses and hedge funds, said Frank Xu, head of asset management. Without takeovers, the size of his business line is already expected to jump at least tenfold in the coming decade from a relatively low base, as mandates from commercial banks drive asset growth.
The Chinese broker is also looking for acquisitions in the wealth business as part of a “game of scale,” Clark Wu, head of wealth management mainly serving retail clients, said in a joint interview. It hasn’t singled out a target yet, he added.
“We are very interested in acquisitions in the international market” for controlling or smaller stakes, Xu said. “The key is business cooperation to complement each other’s strengths.”
China’s asset management sector faces the biggest impact from the opening up of the financial industry, with global giants like BlackRock Inc estimated to grab a share of as much as 15% in 10 years, CICC analysts wrote in November. Still, with plans to acquire new businesses and talent, local firms may remain dominant given their deeper understanding of what Xu called a “complex and tightly knit ecosystem.”
“CICC is confident in adapting to such an ecosystem,” he said. Now controlled by China’s sovereign wealth fund, CICC was set up in 1995 as the nation’s first Sino-foreign investment bank. While Morgan Stanley exited 15 years later, CICC’s “internationalized gene brings it a unique core competitiveness,” CSC Financial Co analysts led by Zhao Ran wrote in a report.