JPMorgan, Nomura Cleared to Control China Brokerages

JPMorgan Chase and Nomura Holding won approval to set up new securities joint ventures in China with majority foreign ownership as regulators followed through on a promise to open up the country’s financial markets.

China’s securities regulator Friday flashed a green light for two new securities joint ventures — Nomura Oriental International Securities Co. Ltd. and JPMorgan Chase Securities (China) Co. Ltd. — each with 51% foreign ownership, according to China Securities Regulatory Commission (CSRC).

Nomura and JPMorgan filed their applications in May, followed by a host of other foreign investment banks vying to enter China’s $40 trillion financial market.

Last April, the securities watchdog issued new rules raising the ceiling on foreign ownership of Chinese securities businesses to 51% from the previous 49%, following the government’s commitment to grant foreign investors wider access to China’s financial markets.

In November, Swiss financial titan UBS Group AG became the first foreign investor to take control of a domestic brokerage by increasing its shareholding in its China securities joint venture, UBS Securities Co. Ltd., from 24.99% to 51%.

The JPMorgan-Nomura announcement Friday marked the first approvals of newly established brokerages with majority foreign ownership on the mainland.

Nomura will register its new China venture in Shanghai with 2 billion yuan ($300 million) of capital in partnership with Shanghai Orient International Co. Ltd. and Shanghai Huangpu Investment Co. Ltd. — both backed by the city government.

The venture applied for business licenses to conduct brokerage, asset management, research and investment activities, Caixin learned. Yu Qing will be named chairwoman and Sun Dongqing will be general manager of the venture, sources told Caixin.

Yu was previously a vice president of China Reinsurance (Group) Corp., the country’s only state-owned reinsurance group. She previously worked for the Ministry of Finance for 20 years dating back to 1989. Sun was previously head of the wealth management division at investment bank China International Capital Corp. Ltd.

JPMorgan’s new venture will also be based in Shanghai with registered capital of 800 million yuan. The U.S. investment concern will partner with Shanghai Waigaoqiao Free Trade Zone Group and four other Chinese investment firms in the venture.

The CSRC requires the two newly established companies to obtain various approval certificates and business licenses from different government securities regulators before they can officially operate in China.

Contact editor Han Wei (weihan@caixin.com)