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* Shuanghui's $7.1 bln purchase of Smithfield tops China'soutbound tally
* Share of financial sector in overall M&A up 66 pct in thepast five years
* More deals seen in healthcare and technology sectors
By Denny Thomas
HONG KONG, Nov 22 (Reuters) - China is set to become Asia'sleader in outbound corporate acquisitions this year, endingJapan's two-year reign, as the country's appetite for overseastargets expands beyond natural resources and into areas such asfood and banking.
China's biggest companies are expected to boost the volumeof M&A deals next year as they seek new sources of revenuegrowth and more global brands to expand their reach into othermarkets, according to investment bankers.
So far this year, Chinese companies have launched $56.2billion of overseas M&As, led by Shuanghui InternationalHoldings' $7.1 billion purchase of Smithfield Foods Inc. Whilethat is below last year's $62.1 billion tally, it is far aheadof the $40.7 billion of deals done by Japanese firms this year,according to Thomson Reuters data.
Energy and power still dominate China's outbound deals invalue terms, though their share of overall M&As has fallen to44.1 percent from 52.3 percent five years ago, the data show. Bycontrast, the proportion of financials has risen by two-thirdsto 14.4 percent.
"Chinese financial institutions are now showing greaterconfidence than at any time since the global financial crisis instriking outbound deals, and we expect more M&A in this space,"Colin Banfield, head of Asia-Pacific M&A at Citigroup, said.
Barclays PLC leads the league table for China'soutbound deals this year, followed by Morgan Stanley,Goldman Sachs and Citigroup, according to ThomsonReuters data.
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Asia's share of global M&As has grown to more than 20percent from the low single-digits 10 years ago, still wellbelow Europe and the United States. But China, hungry foroverseas growth, will push that even higher.
Earlier this month, China Construction Bank Corp agreed to buy a 72 percent stake in Banco Industriale Comercial SA for about $720 million. Citigroupadvised the Brazilian bank, while Morgan Stanley advised CCB.
China has reshuffled the top decks at some of its banks andregulators following the nation's once-in-a-decade politicalleadership change last year.
Bank of China Ltd appointed Tian Guoli as itschairman in May, and in the same month, Bank of CommunicationsCo Ltd named Niu Ximing as its chairman.
As the new management teams settle into their jobs, they areexpected to be more aggressive in purchasing assets - andpossibly other financial institutions.
There is more urgency for Chinese banks to accelerate globalgrowth as the leadership change is poised to precipitate morefinancial sector reforms, further pressuring margins, bankerssaid.
Among the Chinese banks on the prowl are Industrial andCommercial Bank of China Ltd (ICBC) and AgriculturalBank of China Ltd (AgBank), which are in pursuit oftwo separate deals.
ICBC is in talks to buy Standard Bank Group's London trading unit, while AgBank is considering a bid for HongKong's Wing Hang Bank Ltd, Reuters previouslyreported.
Chinese buyers have also expressed interest in strongconsumer and luxury brands overseas, and have managed to inkdeals in that space. Still, the Shuanghui deal showed China Incwas willing to take on a different target - a large, U.S. porkproducer - that came with a serious risk of politicalopposition. After a minor uproar, Shuanghui closed the deal.
"When we look at our own deal pipeline, the private sectoris increasingly prominent," said Citigroup's Banfield, addinghealthcare and tech as key sectors. "Thematically, we see ashift from the SOEs towards private sector-led M&A activity."
