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Gamer turned banker: Tencent acquires stake in China’s oldest investment bank

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JOHANNESBURG — Chinese internet giant Tencent continues to make waves as it’s snapped up a 5 percent stake in China’s oldest investment bank, China International Capital Corporation (CICC). Established in 1995, CICC is regarded as China’s first joint venture investment bank. Listed in Hong Kong, CICC has a wide reach CICC with its headquarters in Beijing as well as subsidiaries and branch companies in Shanghai, and Shenzhen. Another 21 securities branches linked to CICC are located in 19 cities including, among others, Beijing, Shanghai and Shenzhen. The move then by Tencent to link up to CICC is an interesting one, especially when considering Tencent’s WeChat application, which is used by about one billion people. WeChat, like WhatsApp, offers instant messaging features, but it also has the capability to have entire app and payment ecosystems built within it. In recent years, Tencent has also launched China’s first online, branchless bank – ‘WeBank’. Tencent’s investors at Naspers will be looking on closely regarding this latest banking push. – Gareth van Zyl

By Lulu Yilun Chen and Cathy Chan

(Bloomberg) — Tencent Holdings, China’s largest social media firm, is entering the traditional finance industry by investing in CICC International Capital, a move that may help the investment bank’s expansion in wealth management.

Shares of CICC jumped by a record after it said Tencent is paying HK$2.9bn ($372m) for roughly 5 percent of China’s oldest investment bank. The companies will team up on marketing and data analysis, according to an exchange filing.

Ma Huateng, chairman and chief executive officer of Tencent Holdings Ltd., attends a news conference in Hong Kong, China, on March 22, 2017. Photographer: Paul Yeung/Bloomberg

CICC, once dubbed the Goldman Sachs of China after it brought some of the country’s largest state-run firms to market, has been reducing its dependence on volatile investment banking fees and expanding its business catering to rich individuals. It completed a $2.5bn purchase of China Investment Securities this year, plunging into the retail investor market.

“Investors are buying into the fintech concept,” said Chi Man Wong, a Hong Kong-based analyst at China Galaxy Securities. CICC gained wealthy clients through the acquisition of China Investment, and Tencent’s investment “gives the firm lots of room to play with big data and financial technology. The whole strategy is consistent.”

Tencent, which operates the popular WeChat social media service, is buying 207.5 million new Hong Kong-listed shares for HK$13.80 apiece, CICC said. That’s an 11 percent discount to CICC’s Wednesday closing price in Hong Kong, and translates into about 4.95 percent of its total shares once new stock is issued.

Shares of CICC surged as much as 19 percent to HK$18.48 and traded 16 percent higher at 11:59 a.m. in Hong Kong. Tencent was little changed.

Wealth Boost

Cooperation with Tencent in areas such as precision marketing and big-data analysis “will enable the company to enlarge its customer base and provide more personalised and diversified wealth management products and services for customers,” CICC said.

Set up in 1995, CICC was part-owned by New York-based Morgan Stanley until 2010. Its shares were listed in Hong Kong in 2015. The brokerage reported a 46 percent jump in wealth management revenue in the first half, while investment banking sales remained flat.

Tencent gets most of its revenue from gaming but has ramped up its investments in finance, seeking to displace Jack Ma’s Ant Financial’s dominance in mobile payments as well as money management. Other internet firms from JD.com to Baidu. have set up online finance operations, hoping to up-end an industry controlled by state banks that have traditionally favored large government enterprises at the expense of smaller private firms.

Tencent’s online finance business remains nascent and includes a stake in online lender WeBank. Its payments business, which competes directly with Ant’s Alipay, grew by triple-digits in its latest quarter, President Martin Lau told analysts on a conference call.

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