Caixin
Jul 16, 2021 08:53 PM
FINANCE

Morgan Stanley Dumps Local Partner From Name of China Securities Venture

Photo: VCG
Photo: VCG

U.S. investment bank Morgan Stanley has dropped the name of its local partner from its Chinese mainland securities joint venture (JV), in a sign that foreign firms are buying in to China’s plan to liberalize its financial industry.

The brokerage venture — which Morgan Stanley owns with Shanghai Chinafortune Co. Ltd. (600621.SH) — announced Tuesday that it had changed its name to Morgan Stanley Securities (China) Co. Ltd. from Morgan Stanley Huaxin Securities Co. Ltd., according to a statement on its website.

The change followed Tuesday’s close of Shanghai Chinafortune’s sale of a 39% stake in the JV to Morgan Stanley for 570 million yuan ($87.8 million), according to an exchange filing (link in Chinese) on Wednesday. The deal increased Morgan Stanley’s stake to 90%.

Similarly, Swiss investment bank Credit Suisse AG ditched its local partner’s name from its mainland securities JV in June 2020, as it took majority ownership. The company is now called Credit Suisse Securities (China) Ltd., according to its website.

In recent years, a growing number of foreign financial institutions have sought to take control of their mainland securities JVs or set up majority-owned or even wholly owned securities subsidiaries, as the government first raised the ceiling on foreign ownership of a securities firm to 51% in 2018 from the previous 49%, and then scrapped the limit (link in Chinese) in 2020 as part of a broader policy to open up the industry.

The China Securities Regulatory Commission (CSRC) has so far approved at least eight foreign companies to either set up foreign-controlled securities firms or take controlling stakes in existing securities JVs. They include some long-standing players in China’s financial industry, such as JPMorgan Chase & Co., Goldman Sachs Group Inc., UBS Group AG, Japan’s Daiwa Securities Group Inc. and Singapore’s DBS Bank Ltd.

In addition, France’s BNP Paribas SA and the U.K.’s Standard Chartered PLC are awaiting regulatory approval to set up new securities companies on the mainland, public records (link in Chinese) from the CSRC showed.

In the mutual fund sector, China scrapped the cap on foreign ownership last year as well. Like its peers, Morgan Stanley is also in the process of buying out its Chinese partners in its mutual fund JV Morgan Stanley Huaxin Fund Management Co. Ltd., Caixin previously reported.

One of the world’s largest asset managers, BlackRock Inc., opened its wholly owned mutual fund business in China in June, which is the first wholly foreign-owned company of its kind on the mainland. The business has recently filed to launch its first fund to grab a slice of China’s $3.6 trillion mutual fund market.

Contact editor Michael Bellart (michaelbellart@caixin.com)

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