Regulator plans to end ban on Sino-foreign brokerage ventures
Daniel Ren in Shanghai and Tim LeeMaster
Beijing will soon vet applications for Sino-foreign brokerages, reopening a floodgate for global investment banks such as Credit Suisse and JP Morgan to tap the booming market after a two-year suspension.
The China Securities Regulatory Commission said in a statement yesterday that it would publish rules governing joint-venture brokerages 'in the coming days'.
The rules will clarify details such as business scope and procedures in forming brokerage ventures.
This is the CSRC's first official announcement on the matter since it halted approvals in late 2005 in a move to revamp the anaemic broking industry.
It also comes at a time when developed markets are suffering from the subprime crisis while share sales on the mainland remain strong despite some volatility.
'The capital base of most Wall Street banks are stretched so it's a nice gesture, but unless capital costs are not too high that might create some hesitation,' said a banking analyst. 'The deal is all about investing your capital to develop China's securities industry and not about making money next week.'
Industry insiders said the CSRC would not rush in granting approvals and would allow new brokerage ventures to run primary-market businesses such as underwriting share sales initially. Access to lucrative stockbroking and proprietary trading would only be allowed after three years.
Mainland brokerages are benefiting from a bullish market since last year, earning more fees and commissions from a surge in share sales and stock trading.
The market was sluggish between 2001 and 2005 when several domestic brokerages were mired in debt, prompting the regulator to launch reforms to revive the industry including suspension of Sino-foreign ventures.
Only four foreign investment banks managed to form brokerage ventures including Morgan Stanley, UBS, Goldman Sachs and CLSA.