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China to raise foreign brokerages' investment cap
May 30, 2007 / 5:40 AM / 10 years ago

China to raise foreign brokerages' investment cap

SHANGHAI (Reuters) - 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.

<p>A man looks at stock information at a stock exchange in Wuhan, capital of central China's Hubei province, May 30, 2007. REUTERS/Stringer</p>

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, was quoted by state media as saying 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.

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