Pedestrians walk by a line of financial institution signs in Lujiazui, a central business district of Shanghai. [Photo by Sha Lang/for China Daily]

Opening-up offers chance to pick up majority stakes in joint-venture brokerages, banks

Foreign investors are embracing opportunities for business growth in China, thanks to a series of policies aimed at further opening its financial markets.

The country, they expect, will likely take more steps in that direction.

UBS AG announced it has become the first foreign bank to increase its stake to gain majority control of a joint-venture securities brokerage in China－the latest move by a foreign bank in response to a series of policies to further open the Chinese financial markets.

The bank completed the settlement of the transaction on Dec 24, increasing its shareholding in its joint-venture securities brokerage in China, UBS Securities Co Ltd, from 24.99 percent to 51 percent.

Currently, the three other shareholders of the company are: Beijing Guoxiang Property Management Co Ltd (33 percent), Guangdong Provincial Communication Group Co Ltd (14.01 percent), and China Guodian Capital Holdings Ltd (1.99 percent).

Eugene Qian, president of UBS Securities, said: "With majority control, UBS Securities will be able to better leverage its close ties with UBS Group's operations in the region to further take advantage of the wide range of opportunities on offer in China's capital markets, and at the same time make a greater contribution to the UBS Group."

The China Securities Regulatory Commission announced in April 2018 it has increased the limit on foreign investment in securities joint ventures from 49 percent to 51 percent and will remove the cap completely in three years.

In August 2018, the China Banking and Insurance Regulatory Commission also abolished rules that limited foreign investment in domestic banks and financial asset management companies. Previously, the caps on foreign holdings in such financial institutions were 20 percent for a single overseas institution and 25 percent for group investors.

"As a result of policy easing, foreign banks may increase their stake in small and medium-sized Chinese banks. They may also form financial holding companies to conduct business across different fields of the financial sector," said Xiong Qiyue, banking analyst at the Institute of International Finance at Bank of China Ltd.

Mark Leung, JP Morgan China CEO, said: "JP Morgan and many of our clients welcome the unprecedented Chinese reform and opening-up initiatives announced over the past 12 months.

"China represents one of the largest opportunities for many of our clients and JP Morgan. It is a critical component of our growth plans, globally and in Asia. We have strong ambitions to strengthen our position in this very important market in order to better serve our clients and the local community."

China's economic and financial market reforms, the Belt and Road Initiative, the rapid development of the new economy sectors, and RMB internationalization have all presented significant opportunities for JP Morgan and its clients, which have a long-term strategic approach to their business in the country, he said.

The firm announced that it had submitted an application to China's securities regulator, seeking to establish a new, fully-integrated securities brokerage in which it would hold a 51 percent stake, increasing to 100 percent as allowed by regulators over the next few years. The regulator provided first feedback on its application on Nov 12.

The firm's asset management business is also pursuing its plan to increase its current minority stake in joint venture China International Fund Management Co to majority, subject to agreement with its joint venture partners and the authorities concerned.

Besides, JP Morgan is looking to double its research coverage of China-listed companies across all sectors, helping educate global investors about exciting local opportunities.