Citigroup considering onshore cash equities business in China

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The US bank Citigroup Inc. is considering setting up an onshore cash equities business in China and expanding research coverage of Chinese stocks, to boost its share of the business in Asia, said the head of its regional equities unit.

Citi’s sharpened focus on its Asia equities business, which includes stock trading and research, is part of its global effort to bolster trading technology, hire senior bankers and boost financing to hedge funds.

Analysts believe that the inclusion of China-listed shares’ in the US index publisher MSCI’s emerging-markets benchmark this year - a milestone for global investing - would lead to a jump in demand for brokerage and research services.

VCG Photo

That came on top of the introduction of programs allowing two-way trading between stock markets in Hong Kong and Shanghai and Shenzhen, as part of Beijing’s efforts to open up capital markets.

According to Quinlan & Associates’s report last year, China’s brokerage revenue pool reached 41 billion US dollars in 2015, which means that, assuming institutional broking revenue is 10 to 15 percent of the total, a 1 percent market share would bring 40 to 60 million US dollars in annual revenue to an equities house in the world’s second-largest economy.

To tap into an expected demand surge, Citi, which provides research on 175 China-listed firms, plans to increase coverage to 200 by the end of the year and 250 in the long term, according to Reuters.

China’s brokerage revenue pool touched 41 billion US dollar in 2015 /VCG Photo

"We have seen very clearly, as one of the biggest players in [the Hong Kong stock] market, a very significant ramp up in the opening of accounts. It’s very clear that many people are getting prepared for future activity in the Chinese market," Richard Heyes, the head of the Citigroup regional equities unit said.

According to Heyes, Citigroup is also looking to bolster financing support for hedge funds, to help win more trading business and boost its Asia equities market share.

"We have had very meaningful success with some very important, large global hedge funds in the US. We are now expecting or have commitments from many of them to on-board us in Asia either by end of this year or early next year."

(With inputs from Reuters)

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