CITIC Securities, China's first and largest publicly traded brokerage, announced it is to establish a joint venture (JV) with Standard & Poor (S&P), one of the world's major providers of credit ratings, to develop and sell indexes.

The JV's establishment did not need the nod from the China Securities Regulatory Commission (CSRC) because CSRC had no department to supervise the stock index research market, a high official of the broker told China Daily Thursday.

"We have consulted CSRC and got the above answer," he said.

The JV, to be financed with US$500,000 from both parties, is to develop and sell indexes that track stocks and fixed-income securities and charge clients for developing derivative products based on the indexes, said Xu Gang, the research department manager of CITIC Securities.

The JV contract is set for five years with extension options available with the agreement of both sides.

The main indexes for the JV to develop would be the S&P/CITIC 300 and the S&P/CITIC 50.

The S&P/CITIC 300 would be the benchmark index, reflecting the performance of the whole Chinese A-share markets and a successor of the CITIC Index. It will cover over 60 percent of the total A-share market capitalization and about 55 percent of the liquidity of the entire market in terms of the total value traded.

The S&P/CITIC 50 will cover the 50 largest and most liquid stocks, with sound financial fundamentals drawn from the S&P/CITIC 300.

As an arm of China's biggest state-run investment company, CITIC Securities has been a brokerage heavyweight. It launched its own index in 2000, which gradually gained wide acceptance among investors. Nearly 30 funds adopted CITIC indices as performance benchmarks.

In late 2003, CITIC and S&P had already begun to cooperate in developing indexes, but as China's economy and securities market developed, the competition became very tough, Xu said.

Competition among global index providers highlights the strategic importance of China's financial markets and the competition in the domestic index market induced the strategic alliance of the two market leaders, he said.

CITIC Securities' business has still been expanding its business this year, even though China's brokerage sector is in the red for the fourth year running. On Wednesday, CITIC Securities announced it would acquire Zhejiang-based Gold Stone Securities for 796 million yuan (US$98.3 million).

This is the broker's second acquisition after it swallowed up the debt-ridden China Securities along with China Jianyin last month. The two companies were last week said to be forming a new brokerage with CITIC Securities taking a 60 percent stake for US$200 million.

Nationwide, the acquisition will add 36 brokerage outlets to CITIC Securities' network, keeping its expansion process on track.

Two months ago it got the regulator's approval to expand its business outside the mainland by setting up a unit in Hong Kong.

CITIC Securities is working to become China's No1 brokerage, a high company official was reported as saying recently.

(China Daily September 16, 2005)