China securities fee revenue expected to more than double by 2023: study

HONG KONG (Reuters) - Revenue from securities fees in China is expected to more than double to $103 billion in the next six years, a new report by a financial consultancy said on Wednesday, emphasizing the sector’s attractiveness to foreign banks.

The growth is expected to be driven by Chinese securities firms seeking new investment and funding opportunities as well as rising cross-border deal activities, consultancy Quinlan & Associates said on Wednesday.

It forecast China’s total securities revenue pool to rise to 708 billion yuan ($103 billion) by 2023, up from 311 billion yuan in 2017.

China’s securities industry, which includes brokerage and underwriting services, has historically been dominated by domestic players. Foreign firms, which can only own minority stakes in joint ventures with Chinese companies, have struggled to gain market share.

Income from the top eight domestic Chinese brokerages was more than eight times that of the top eight joint ventures last year, according to the consultancy’s analysis of data from the Securities Association of China.

However, China’s vice finance minister Zhu Guangyao announced last November that foreign firms could own 51 percent of securities joint ventures, and their domestic partners did not need to be securities firms.

The rule change would allow foreign banks to benefit from the rapidly-growing fee pool in China, though it is unclear when it would take effect.

“Foreign banks can’t compete with the local players on price or balance sheet, but they can when it comes to creating complex products that aren’t available on the mainland, and in cross border activities,” said Quinlan & Associates Chief Executive Officer Ben Quinlan.

Foreign banks such as JPMorgan JPM.N, UBS UBSG.S and Nomura 8604.T have applied for approval to hold majority stakes in Chinese securities joint ventures.

However, little is known publicly about the status of these applications.

Quinlan said rising trade tensions between China and the United States could slow the easing of rules on foreign holdings in the Chinese securities sector.

“I think the one potential hurdle is a possible trade war,” Quinlan said, although he added that there were indications that Chinese regulators wished to open up the sector.

Reporting by Alun John; Editing by Sumeet Chatterjee and Darren Schuettler