Brokers opened to foreign firms
Beijing yesterday loosened its iron grip on the securities industry, opening up listed brokerages to foreign investment and modestly expanding the business scope of securities joint ventures.
Foreign firms will for the first time be allowed to buy strategic stakes in listed mainland securities companies while brokerage joint ventures will be able to sponsor bond and A-share offerings, under new rules which came into effect yesterday.
However, the foreign ownership cap on securities joint ventures remains at 33 per cent and foreign joint ventures are barred from lucrative domestic stocks trading.
The China Securities Regulatory Commission said that the new regulations showed the regulator was 'proactively and steadily pushing ahead with the opening up of Chinese securities companies to the outside world.'
Foreign investment banks had been hoping the securities regulator would raise the investment ceiling to 49 per cent after Beijing agreed to lift a much-criticised two-year moratorium on the licensing of new joint-venture securities firms last month.
The new regulations cover foreign investment in existing listed brokerages, which are allowed to conduct a full range of broking activities, and clarify the rules for establishing securities joint ventures, which remain tightly controlled by the government.
According to the rules, individual foreign firms may take a maximum stake of 20 per cent in listed securities companies, with total foreign investment capped at 25 per cent.
Although joint ventures are still not allowed to buy and sell domestic shares, analysts said they would remain the target for many investment banks looking for a way into the lucrative brokerage sector.
'At this preliminary stage [overseas investors] would probably rather choose something of a joint venture nature than direct investment so they can avoid disputes or political pressure if anything comes up later,' said Simon Lam Ka-hang, research director at Christfund Securities.
Goldman Sachs and UBS are the only foreign institutions with joint-venture securities companies, but they will soon be joined by Credit Suisse and Morgan Stanley.
Credit Suisse will set up a joint venture with mainland conglomerate Founder Group to underwrite stock market listings and conduct advisory and research services, while Morgan Stanley will partner long-established China Fortune.
With additional reporting by Tim LeeMaster