(Bloomberg) — A small Chinese brokerage has emerged as an unlikely winner from the merger plan of industry leaders Guotai Junan Securities Co. and Haitong Securities Co., thanks to its name.
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Sealand Securities Co., whose Chinese name “Guohai” sounds like the merger of names for “Guotai Junan” and “Haitong,” saw its shares jump limit-up on Friday — far outperforming peers — after the merger proposal that will create the largest brokerage in China.
The merger of Guotai Junan and Haitong, both of which are partly owned by Shanghai’s state assets administrator, will create a new entity with assets of 1.6 trillion yuan ($230 billion), topping that of current leader Citic Securities Co.
Chinese retail investors are known for speculative trading based on homophones — names that sound similar to another name or a phrase. A stock with a name sounding like “Trump wins big” in Chinese soared after the US presidential debate in June. In 2023, retail traders chased stocks with dragon-related names heading into the Chinese zodiac’s Year of the Dragon.
Sealand is trading ex-dividend on Friday, according to a company filing. Trading in shares of Guotai Junan and Haitong was suspended in Shanghai and Hong Kong starting Friday.
–With assistance from Jing Jin.
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