HONG KONG (Reuters) - Credit Suisse’s Chinese joint venture Credit Suisse Founder Securities will start offering broking services to onshore and foreign investors from Wednesday.
The brokerage business will be based in Qianhai, a Chinese free trade zone near Hong Kong, and will serve both institutional investors in China as well as foreign funds, said Credit Suisse Greater China’s vice-chairman, Nicole Yuen.
Credit Suisse, which formed its Chinese joint venture with Beijing-based Founder Securities in 2008, will join Goldman Sachs and UBS in offering onshore broking services in the world’s second-largest economy.
The demand for onshore broking in China is also likely to benefit from the extension of the Shanghai-Hong Kong stock trading link to Shenzhen’s $3 trillion market, and a possible trading link with London in the future, Yuen told Reuters.
Credit Suisse Founder Securities, in which the Swiss bank holds a 33.3 percent stake, is also looking to benefit from the expected inclusion of Chinese A shares in MSCI’s widely-followed emerging markets index.
“It’s definitely a critical step in terms of the expansion of the Greater China business onshore,” Yuen said. “We believe that the MSCI inclusion will be a big catalyst for international investors to put money or start looking into A-shares.”
China’s gradual opening up of markets for overseas investors have seen a greater flow of capital with share trading turnover reaching $9.8 trillion in the first half of this year, 1.7 times the rest of Asia Pacific, according to financial services consultancy Quinlan & Associates.
The brokerage revenue pool in China stood at $39.9 billion in 2015, it said. Assuming institutional broking revenue is 10-15 percent of the total, a 1 percent market share would bring in $40-60 million in annual revenue.
“We anticipate the institutional (broking) revenue pool to grow strongly in the coming years and see considerable upside for JVs who can successfully compete in this space,” Hong Kong-based Quinlan said in a report last month.
Almost all leading banks including Citigroup, Deutsche Bank, Goldman Sachs, Morgan Stanley and UBS have securities joint ventures with local firms in China, which offer equity and debt underwriting and M&A advisory services.
Some of the global banks invest in China’s stock markets on behalf of their foreign clients using the so-called qualified foreign institutional investors quota, but they don’t have the regulatory approval for onshore stock trading.
Yuen said with the launch of the onshore brokerage business Credit Suisse was also planning to add 50 more China-listed companies in its China equity research coverage of 431 stocks.
“What we would like to do is (to) divert some of our very precious resource to actually cover the sectors that we think will be the future of China - the technology side of things, healthcare, consumer, Internet,” she said.
Credit Suisse Chief Executive Tidjane Thiam said in April this year that the investment bank was seeking to expand in China and would invest further in a country where it had been “underweight”.
($1 = 6.7709 Chinese yuan renminbi)
Editing by Greg Mahlich