Beijing is urging Chinese financial institutions to push beyond emerging markets and buy up distressed banking assets in Europe.
In a landmark deal announced last week, Haitong Securities bought Portuguese Banco Espirito Santo de Investimento from bailed out bank Novo Banco for €370m. This is the first purchase of a European investment bank by a Chinese company.
According to Reuters, this marks a shift towards smaller deals with bigger controlling stakes on the part of China’s finance giants. According to its data, out of the $3.2 billion worth of overseas deals that China made last year, three three-quarters were majority stake purchases.
This change of approach helps Chinese firms to acquire European banking licences that accelerate growth and market penetration for the wider group, as well as gaining invaluable expertise, particularly in debt markets.
“Increasingly, Chinese financial firms are seeking control deals as a way to expand their global footprint,” said Mayooran Elalingam, head of Asia-Pacific M&A at Deutsche Bank. “Several distressed opportunities are available in euro zone economies and we expect the Chinese financial services sector to be active in these situations.”
The push is reported to be actively encouraged by the Chinese government as part of a strategy to increase overseas banking outlets and establish RMB as a key currency in international trade.
For now, the superpower’s finance industry appears to be testing the water with lower-value deals. Whether they will soon have the confidence to bid for Europe’s flailing commercial banks remains to be seen.
A total of US$4.88 trillion of debt has been sold so far this year reports Dealogic, close to the level of 2007 when US$4.91 trillion of bonds were issued over the same period.
The German industrial gases group has ended talks with its US peer on a potential union to establish a market leader.
The US exchange said it will introduce incentives from next month to make lower-volume exchange traded funds easier to buy and sell.
A survey of 1,000 merger and acquisition dealmakers finds that seven in 10 expect Brexit uncertainty to limit the number of deals.