China OKs JPMorgan, Morgan Stanley joint ventures
Chinese securities regulator on Friday approved the joint ventures of JP Morgan Chase & Co and Morgan Stanley, bringing the banks a step closer toward operating securities businesses in China that they, and other banks, have long sought.
January 07, 2011 / 20:59 IST
Chinese securities regulator on Friday approved the joint ventures of JP Morgan Chase & Co and Morgan Stanley, bringing the banks a step closer toward operating securities businesses in China that they, and other banks, have long sought.
The approval will enable the two Wall Street banks to underwrite stocks and bonds in one of the fastest growing securities market in the world.While foreign banks are attracted to China's rapidly growing and markets, finding the right JV partner and the regulatory restrictions have delayed and sometimes derailed foreign banks' attempt to enter the Chinese markets.For JP Morgan, the approval allows it to make its maiden entry into the Chinese securities market, while Morgan Stanley will make a come back after exiting its earlier joint venture with China International Capital Corp (CICC) last year.JP Morgan will link up with First Capital Securities Co, a Shenzhen-based brokerage and hold 33% of the venture.For Morgan Stanley, the green light allows it to move on with its new Chinese partner, Huaxin Securities Co , also known as China Fortune Securities Co Ltd.Morgan Stanley was the early entrant into China when it formed the JV with CICC in 1995 but recently sold its stake to a group of investors including KKR, TPG and Singapore's GIC.Morgan Stanley will hold one-third stake in the new joint venture, which will be called Morgan Stanley Huaxin Securities Co and registered and principally located in Shanghai.Chinese IPO markets have just taken off in the past two years, with total proceeds from last year's offering rising to USD 69.5 bn, compared with just USD 9.5 bn in 2008, according to Thomson Reuters data.China has dominated the global IPOs, accounting for about 27% of the global volumes last year. Similarly, the bond market in China have grown three times since 2008 to USD 449 bn in 2010.The approval by the China Securities Regulatory Commission was expected, as more and more foreign banks enter into joint venture partnerships in China, which are subject to a mandatory ownership cap of 33%.Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs, and UBS AG have similar ventures in China.Other global investment banking banks, including Bank of Merrill Lynch, Barclays an Citigroup are on the lookout of joint ventures partners. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
