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With impending shareholding changes, CGS-CIMB eyes stronger China-Asean ties

Jovi Ho
Jovi Ho9/29/2022 08:09 PM GMT+08  • 4 min read
With impending shareholding changes, CGS-CIMB eyes stronger China-Asean ties
CGS-CIMB Securities group CEO Carol Fong has confirmed a split between the brokerage’s parent companies, with China Galaxy Securities assuming full control by January 2023. Photo: Albert Chua/The Edge Singapore
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CGS-CIMB Securities group CEO Carol Fong has confirmed a split between the brokerage’s parent companies, with China Galaxy Securities (CGS) assuming full control by January 2023.

Speaking to The Edge Singapore on Sept 28, Fong says a call and put option has already been put in place. “By January next year, it will be 100% owned by China Galaxy [Securities],” she says. CGS-CIMB declined to reveal the transaction value.

This confirms an August report by The Edge Malaysia, which said Malaysia’s CIMB Group Holdings may exit the venture by divesting its remaining minority stakes to CGS by year-end, leaving CGS as the sole shareholder.

That said, both parties will continue to collaborate in stockbroking, says Fong. “The intention of both CGS and CIMB is to work closely together. So, we are in the midst of finalising a collaboration agreement to govern our relationship going forward. It’s our every intention to work very closely with CIMB, as we have in the past.”

On paper, however, this marks the end of two joint ventures (JVs). The regional stockbroking JV was launched in January 2018. In July 2019, the companies set up their Malaysian stockbroking JV, a 50:50 partnership between CIMB’s and CGS’s wholly-owned subsidiaries — CIMB Group Sdn Bhd and China Galaxy International Financial Holdings (CGI) respectively.

Until December 2021, the regional CGS-CIMB Securities was an equal JV between CIMB and CGI.

See also: CGS-CIMB launches world's first Apac low-carbon ETF

That month, CIMB reduced its 50% stake in the stockbroking JVs to 25.01% and 25% of CGS-CIMB Securities International (the holding company of the regional JV) and CGS-CIMB Holdings Sdn Bhd (holding company of the Malaysian JV), respectively.

At CGS-CIMB, Fong is responsible for the overall management and financial performance of the entire group’s equities business, a regional franchise covering Asia Pacific (ex-Japan) as well as offices in London and New York.

She was previously country investment banking CEO of CIMB Group, where she was responsible for building up the investment banking business, key client and regulator relationships in Singapore.

See also: CGS-CIMB CEO wants to revive S-chips, strengthen research amid quiet year for SGX

Mecca for ETFs

Fong hopes to see the Singapore market gain more depth and breadth with new products to pique investors’ interest.

She recalls how S-REITs, a key asset class for most investors, were launched in 2002 to tepid response for the first three years. “It was bumpy, it took some time to move up, but look where it is. We are the REIT mecca for Asean,” she says.

In the same vein, Fong hopes Singapore Exchange (SGX) can do the same for ETFs. “It is my fervent wish, and we also want to contribute to that success, to create a mecca for ETF offerings here,” she says.

In 2021, SGX’s ETFs saw an increase of almost 50% in AUM growth, with combined AUM at $12.55 billion. Until early this year, Singapore-listed ETFs maintained different board lot sizes ranging from five to 100 units. In January, SGX lowered the board lot size of all ETFs here to one unit.

Fong, who is also chairman of the SGX Securities Advisory Committee, believes the ETF space will grow. “It’s already fractionalised. Rather than buying cryptocurrency, it does encourage investors to buy a wider portfolio,” she says.

Thus far this year, the number of IPOs on SGX has been “quite low” — in line with the global trend. Nevertheless, Fong takes heart over the few large secondary listings that have gone ahead here, namely, Filipino alcohol seller Emperador, which was recently added into the Straits Times Index as one of the 30 component stocks, expelling ComfortDelGro in the process; as well as Chinese electric car maker Nio, which was already listed in the US and Hong Kong.

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“I thought Nio was quite successful. I do believe that SGX is working very hard to attract more listings, including Chinese listings,” she says.

Fong adds: “On our part, now that we are going to become fully-owned by CGS, we are putting a lot of effort into educating Chinese companies. In fact, in November, we’re going to launch a big virtual event in China, where we get the various exchanges to talk about listings outside of China. The focus will be on companies that already have an Asean presence.”

CGS-CIMB itself has set a target to go public by 2025, though current market conditions are unsatisfactory. “We’re still going through the approval process, but our stakeholders have been very supportive,” says Fong. “I’m still hopeful that we can get a listing by the first quarter of 2024.”

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