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HONG KONG EXCHANGES AND CLEARING LIMITED

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Exclusive: China Merchants Securities to close London commodities brokerage

10/15/2020 | 12:05pm EDT

LONDON (Reuters) - The British arm of China Merchants Securities (CMS) will close its commodities brokerage after a review of the business that aimed to align it with the group's global strategy, a letter seen by Reuters said.

The letter did not detail the strategy.

CMS's United Kingdom, Hong Kong and China offices did not respond to emailed requests for comment. Telephone calls to the London office were unanswered.

Based in Shenzhen and listed in Hong Kong and Shanghai, CMS in 2019 was the fourth-largest securities broker by assets in China with revenues of 25.66 billion yuan ($3.8 billion).

Metal broking sources say CMS retreating from London could be linked to political tensions between Britain and China over Hong Kong, but that the decision was also tied to the London operation's difficulties in generating revenue.

Commodity trading volumes this year have come under pressure from COVID-19 lockdowns, which have hit demand for oil and industrial metals such as aluminium and zinc.

One source with direct knowledge of the matter said the decision to close CMS's London commodities unit was made by the Hong Kong office, but declined to give further details or say whether the London office would close completely.

"Unfortunately due to a change in business direction, we have taken the decision to close our commodity brokerage business which has been operating in the UK since 2014," the letter sent to a customer this week said.

The letter signed by CEO Wei Zhang also said China Merchants Securities (UK) Limited ("CMSUK") is looking to close the customer's accounts by Nov. 30.

"We will remove all margin/credit facilities on your accounts from October 28th 2020," the letter said. "In order to facilitate the closure of your accounts we will require you to close out, or transfer out, positions you currently hold."

CMSUK is a Category 2 member of the London Metal Exchange, allowing it to trade LME contracts on the exchange's electronic system and on the telephone and as a member of LME clear it can clear trades for itself and for customers.

It is also a member of the Intercontinental Exchange (ICE), according to CMSUK's website.

"(CMSUK) will eventually have to give up both the LME and ICE," a source familiar with the matter said.

Chinese banks and brokers have for some years made a beeline for a larger slice of the billions of dollars of commodities business that goes through London every year.

(Reporting by Pratima Desai; additional reporting by Tom Daly and Samuel Shen in Shanghai; editing by Veronica Brown and Emelia Sithole-Matarise)

By Pratima Desai


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
CHINA MERCHANTS SECURITIES CO., LTD. -0.11% 17.6 End-of-day quote.-24.59%
GUOSHENG FINANCIAL HOLDING INC. -0.21% 9.39 End-of-day quote.-31.71%
HONG KONG EXCHANGES AND CLEARING LIMITED 1.66% 490.8 End-of-day quote.15.48%
HUATAI SECURITIES CO., LTD. -1.28% 16.15 End-of-day quote.-10.33%
INTERCONTINENTAL EXCHANGE, INC. -0.51% 130.22 Delayed Quote.13.55%
LONDON BRENT OIL 0.32% 85.54 Delayed Quote.62.71%
SHANGHAI ORIENTAL PEARL GROUP CO., LTD. -0.51% 7.84 End-of-day quote.-12.30%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.21% 6.3889 Delayed Quote.-1.84%
WTI 0.57% 83.068 Delayed Quote.71.11%
YONGGAO CO., LTD. -1.93% 4.57 End-of-day quote.-28.37%
ZHEJIANG YASHA DECORATION CO.,LTD 1.58% 7.06 End-of-day quote.-5.11%
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Financials
Sales 2021 22 338 M 2 873 M 2 873 M
Net income 2021 13 788 M 1 773 M 1 773 M
Net cash 2021 64 337 M 8 275 M 8 275 M
P/E ratio 2021 45,1x
Yield 2021 1,96%
Capitalization 621 B 79 868 M 79 867 M
EV / Sales 2021 24,9x
EV / Sales 2022 21,2x
Nbr of Employees 2 204
Free-Float 94,0%
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Mean consensus BUY
Number of Analysts 27
Last Close Price 490,80 HKD
Average target price 551,80 HKD
Spread / Average Target 12,4%
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Managers and Directors
Alejandro Nicolas Aguzin Chief Executive Officer & Director
Romnesh Lamba Co-President
Chi Kin Tai Co-President, COO & Executive Director
Bik Yun Lau Group Chief Financial Officer
May Lung Cha Non-Executive Chairman
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