ABN Amro gets new China partner
Tianjin firm steps in to take controlling interest of fund management venture from former rising star
Dutch bank ABN Amro will have a new Chinese partner in its mainland fund management joint venture to replace Xiangcai Securities, which has been battered by a five-year market slump.
Troubled Xiangcai had agreed to sell its controlling interest in Beijing-based ABN Amro Xiangcai Fund Management to Tianjin-based Northern International Trust & Investment Co (Nitic), sources said yesterday.
The sale will remove a major uncertainty over the fund management venture's future as Xiangcai Securities, like many other brokerages in the mainland, is teetering on the verge of bankruptcy after the stock market slump exposed problems in its trading and underwriting activities.
The transaction will also help Tianjin Teda Investment Holdings, a state-controlled conglomerate backed by the Tianjin Economic and Technological Development Area and a 28.4 per cent shareholder in Nitic, fulfil its ambition of expanding its financial arm.
Meanwhile, ABN Amro's asset management arm is expected to raise its stake to 49 per cent in line with its 2003 agreement to buy 33 per cent of the fund manager, then called Xiangcai Hefeng.
The transaction is now pending with the China Securities Regulatory Commission.
ABN Amro is the first foreign investor to have bought into an existing mainland fund manager. Most other foreign companies that have tapped the mainland fund market have taken the route of setting up a new operation with Chinese partners.
At the time, Xiangcai - which also has an investment banking joint venture with CLSA - was considered a rising star among the nation's 130 brokerages.
In just three years, its slide towards bankruptcy highlighted the risks of the mainland market.
A crackdown on trading irregularities and efforts to float non-tradable shares locking up 65 per cent of market capitalisation have triggered a more than 40 per cent fall in share prices since their peak in June 2001.
This has caused the brokerage industry widespread losses.
Xiangcai is selling off some of its better assets before a government-endorsed restructuring that could bring in foreign investors.
A new foreign investor in Xiangcai could complicate the brokerage's relationships with ABN Amro and Hefeng, analysts had said previously.
Eighteen companies initially vied for the stake in ABN Amro Xiangcai, which manages six mutual funds.
Nitic eventually beat Fujian-based Industrial Bank in the final stage by offering a higher price and improved terms.
Industrial Bank, 15.98 per cent owned by Hang Seng Bank, is trying to flex its muscle outside its traditional banking business, following the examples set by bigger rivals such as Bank of Communications and Industrial and Commercial Bank of China.
Teda is already a 25 per cent shareholder in Bohai Bank, which is also 19.99 per cent owned by Standard Chartered Bank.
Nitic's financial industry portfolio includes stakes in three other domestic mutual fund managers, insurance companies, securities and venture capital firms.
Last month, Nitic's chairman came under investigation for corruption, a development that clouded negotiations.
