Farsighted Development Strategy and Efficient Capital Operation
In the beginning, CITIC Securities was not the best securities firm in China. However, with its principle of "prudent management and bold innovation," CITIC made good use of capital operation. It phased out each business development plan in order of priority and shaped itself with overall development as one of the top securities brokers in terms of asset size, profitability, customer base, and brand image. Eventually, CITIC took the leading position in the industry. During this process, capital operation was its best-played and most successful card.
After it took over Wantong Securities in 2004, CITIC Securities created, together with China Jianyin Investment Co., the China Securities Co. Ltd. It aimed to take over the entire securities business assets of the former Huaxia Securities. CITIC Securities later also acquired Jintong Securities. After an expansion with a series of acquisitions, CITIC now has a number of subsidiaries, 165 securities business offices, and 60 securities service centers in
Mainland China, helping it build a retail network that was absent for a long time. Along with an increasing market share of brokerage and substantial sales improvement, CITIC has topped all other Chinese brokers in terms of trading volume and amounts of stocks and funds.
With regard to asset management, CITIC has laid out the strategy for "concerted development of buyer-side and seller-side services" as one of the first securities firms qualified for innovative business activities. After the acquisition of the Huaxia Fund Management Co. Ltd. in 2006, CITIC created a number of new buyer-side business lines and made efforts toward developing fund management, asset management, collective wealth management, industrial investment funds, private equity funds, risk management, financial derivatives, futures, and merchant banking. Meanwhile, CITIC has also made some breakthroughs in the seller-side services. It has managed to realize a balanced growth in profitability and to successfully combine its strengths in finance, sales network, capital operations, and management.
In regard to international business, CITIC created in 2005 the CITIC Securities (Hong Kong) Ltd., which took over the China CITIC Group's investment banking business in Hong Kong and built a cross-border bridge between capital markets. In the first half of 2007, CITIC caused the capital of the CITIC Securities (Hong Kong) to be increased for the second time, and changed its name to the CITIC Securities International Ltd.
CITIC Securities has been a leader in Chinese investment banking. In 2010, CITIC realized a total bond/debenture sales amount of CNY 232.8 billion and ranked first in regard to the sales of Treasury bonds, China Development Bank (CDB) bonds, Agricultural Development Bank of China (ADBC) bonds, and Export-Import Bank of China (EXIMBANK) bonds. CITIC realized a spot bond/debenture trading amount of CNY 3 trillion and ranked first in terms of total trading amount and volume of interest rate swaps and spot bond/debenture trading. It ranked second in terms of securities underwriting and stock trading, fund position sizing-generated commissions, and number of qualified foreign institutional investors (QFII) clients. CITIC was also awarded the first prize for New Wealth Best Sales Service Team.
As for research activities, CITIC was awarded first prize in the 2010 New Wealth best analyst awards for the Best Chinese Research Team for five consecutive years. It also won the first prize for research teams in the Securities Market Weekly Crystal Ball Awards and the China Securities/CCTV Golden Bull Analyst Awards.
Lessons
The lessons to be learned from CITIC Securities are as follows:
- A securities firm has to learn how to seize market opportunity and make use of capital operation. In the securities industry, where securities
firms are at the mercy of the market and compete against each other in homogenous products and services, an up-and-coming company must learn how to identify and seize opportunity and make good use of capital operation for rapid business expansion and improvement of competitiveness.
Integration and conglomeration can help ensure balanced business growth and steady improvement of profitability. By now, the integration and conglomeration models have emerged. As securities firms at large consolidate their capital strengths and the regulatory authorities lower the thresholds for access to some activities, the arena of competition is expanding. Further and faster growth builds upon steady enhancement of overall competency, which requires a company to integrate resources, create internal synergies, diversify profit-generating activities, and stimulate interaction between business activities.
