Credit Suisse, Founders forge ties to catch up on mainland listings

PUBLISHED : Friday, 11 January, 2008, 12:00am
UPDATED : Friday, 11 January, 2008, 12:00am

Credit Suisse, the second-largest bank in Switzerland, plans to set up a mainland securities brokerage with Founders Group in the hope of catching up with rivals UBS and Goldman Sachs in underwriting domestic initial public share offerings.

The two partners intend to apply for mainland approval in the near future, according to a Credit Suisse statement. Credit Suisse will hold a 33 per cent stake in the joint venture.

'Credit Suisse believes that in Founders it has an extremely strong partner, with invaluable local expertise and experience in the Chinese financial services industry and we look forward to a strong and mutually rewarding relationship,' said Credit Suisse chief executive Paul Calello.

Equity underwriting volume on the mainland last year rose to 472.5 billion yuan, or more than twice the volume of 2006, in the first full year of issuance after Beijing lifted a ban on initial offerings in mid-2006.

'2007 has been a really good year for the industry and we see securities houses reporting stellar numbers,' said Alexander Lee, financial institutions analyst at brokerage CIMB. 'Going forward, there are those who believe share valuations are peaking but what will support trading is the continuous roll-out of new share issues.'

China International Capital Corp, one-third owned by United States investment bank Morgan Stanley, dominated last year's market with a 28.5 per cent share of all equity sales. Citic Securities, the largest US securities firm, was second with a 20 per cent. A joint venture controlled by UBS was third with 13 per cent while Goldman Sachs finished seventh, according to Bloomberg data.

'The competition in the A-share listing business will be fiercer than before and it is expected that the foreign joint-venture securities firms could gain significant market share within a few years as they have better knowledge and more sophisticated skills in conducting investment banking than domestic firms,' said Lee Yuk-kei, a financial analyst at Core Pacific-Yamaichi. Domestic firms, however, had the advantage of a broader business base, he added.