Caixin
Sep 26, 2019 08:10 PM
FINANCE

Japanese Financial Giant Daiwa Wants Its Own China Brokerage

A screen at a Daiwa Securities office in Tokyo shows Japan’s benchmark Nikkei stock index on Feb. 6, 2018. Photo: VCG
A screen at a Daiwa Securities office in Tokyo shows Japan’s benchmark Nikkei stock index on Feb. 6, 2018. Photo: VCG

After withdrawing from China five years ago, Japanese financial giant Daiwa Securities Group Inc. has applied to the country’s securities watchdog to set up a foreign-controlled securities joint venture.

Daiwa Securities said that it has filed an application to the China Securities Regulatory Commission (CSRC) for a joint venture with Beijing State-owned Capital Operation and Management Center (BSCOMC) and Beijing Xicheng Capital Holdings Co. Ltd., according to a Wednesday statement on its website.

In November 2018, Daiwa Securities signed a memorandum of understanding with BSCOMC, an investment vehicle controlled by the Beijing municipal government, to form a securities joint venture, according to the statement. Daiwa will own 51% of shares of the venture, while BSCOMC and Beijing Xicheng will hold the other 49%, the statement said.

Beijing Xicheng is a subsidiary of an investment vehicle owned by the government of Beijing’s downtown Xicheng district.

Daiwa, Japan’s second-largest brokerage by assets behind Nomura Holdings Inc., plans to grow the new venture “by prioritizing building cross border business with our global network and the knowledge of shareholders,” it said in the statement.

The new venture is set to start running by next June, according to a July statement (link in Chinese) on the Beijing government’s website.

Daiwa left China in 2014 when it terminated a joint venture with Shanghai Securities Co. Ltd., due to disagreements with its Chinese partner and poor business performance.

In April 2018, China’s securities regulator issued rules allowing foreign firms to take majority stakes in domestic securities companies. It was a milestone in the country’s campaign to relax restrictions and lower barriers for foreign players in China’s financial services market.

In November, Swiss financial titan UBS Group AG became the first foreign investor to take control of a brokerage in China by increasing its shareholding in its securities joint venture to 51%. In March, China’s securities regulator gave the green light to JPMorgan Chase and Nomura Holdings to separately set up new securities joint ventures in China — with 51% foreign ownership.

As of the end of March, Daiwa’s total assets had expanded to 22.9 trillion Japanese yen ($212.9 billion) from 21.1 trillion yen at the end of 2018, according to its financial report. In the first quarter this year, it recorded net profit of 16.1 billion yen, down 13.3% year-on-year.

Contact reporter Timmy Shen (hongmingshen@caixin.com, Twitter: @timmyhmshen)

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