09.01.2017

UBS, Morgan Stanley to raise stakes in China securities JV

400Morgan Stanley and UBS Group are planning to raise their stakes in their securities operations in China to the maximum 49% allowed, people with direct knowledge of the moves said, Reuters reported on Monday.

The asiatic giant allowed foreign banks to boost share holdings in securities joint ventures to a maximum 49% in 2012 from the previous cap of a third to help modernise the country's capital markets.

Foreign investments banks with securities joint ventures in China, however, have not as yet raised their stakes as most of the ventures were small or struggling to break even due to sluggish onshore deals.

But the prospect of China moving soon to allow global banks to own majority stakes in securities joint ventures and growing volumes of equity issuance and trading businesses have motivated some foreign banks to explore raising their holdings.


Morgan Stanley and its Chinese joint-venture partner, Huaxin Securities, have agreed to a proposal to raise the US investment bank's stake in the venture, which mostly provides investment-banking services and research, to 49% from 33.3%, two people with knowledge of the plan said. 

The stake increase by Morgan Stanley is awaiting approval from the Chinese securities regulator, one of the sources said. Morgan Stanley was the first overseas bank allowed to enter the market when it helped establish China International Capital Corp. in 1995. 

Swiss bank UBS, which registered its Chinese securities joint venture in 2006, is also in talks to raise its stake in UBS Securities to 49% from 25%, two separate sources told Reuters. UBS China securities joint venture businesses include fixed income, equity underwriting and financial advisory.

One of the sources with knowledge of the UBS plans said the bank expected the process to be completed later this year. The Wall Street Journal reported on UBS and Morgan Stanley’s plans on Sunday. Spokesmen for both banks declined to comment.


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