Chinese School - Gov't to raise foreign brokerages' investment cap

BIZCHINA / Center

Gov't to raise foreign brokerages' investment cap

(Reuters)
Updated: 2007-05-30 15:47

China will raise the ceiling for foreign investment banks' stake holdings
in domestic brokerages and joint ventures before the year-end, to open
the sector wider to overseas investors, state media reported on Wednesday.

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A foreign investor currently can only buy up to a 20 percent stake in a
Chinese securities firm, while the maximum for foreign stakes in
Sino-foreign joint ventures is 33 percent.

Tu Guangshao, vice chairman of the China Securities Regulatory
Commission, said that the government plans to gradually raise the ceiling
by the end of this year.

He made the remarks at a domestic financial forum on Tuesday, official
securities newspapers reported.

The U.S. Treasury Department last week announced a series of reforms that
it said China had committed to during the second round of the U.S.-China
"strategic economic dialogue".

As part of those commitments, China will lift a freeze on the entry of
new foreign securities firms and resume licensing securities companies,
including joint ventures, in the second half of 2007.

Overseas banks looking for new sources of growth are eager to enter the
Chinese market, whose key stock index has nearly quadrupled in value
since the start of last year on surging turnover. The number of brokerage
accounts this week surpassed the 100 million mark.

Citigroup and Merrill Lynch are tipped to be among the first
beneficiaries of the fresh market opening, industry analysts said. Others
circling the market include HSBC, Credit Suisse and JPMorgan.

Swiss bank UBS last year won approval to set up a brokerage business in
China via a 20 percent investment in a domestic firm, Beijing Securities.

Foreign early birds to the market also include Wall Street banks Morgan
Stanley and Goldman Sachs.

Morgan Stanley has long had a leg up on most of its global rivals in the
Chinese market. In 1995, it bought a 34.3 percent stake in the country's
first investment bank joint venture, China International Capital Corp.

Goldman Sachs owns 33 percent of the Beijing-based joint venture Goldman
Sachs Gaohua Securities Co., which was established in 2004. CLSA, the
investment banking arm of French lender Credit Agricole, owns a 33
percent stake in Shanghai-based China Euro Securities Ltd.

China is also studying plans to let domestic brokerages conduct asset
management business under the Qualified Domestic Institutional Investor
scheme, which allows Chinese to invest in overseas securities markets, Tu
was quoted as saying.

(For more biz stories, please visit Industry Updates)

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