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BOC International Holdings (BOCI), the overseas investment banking arm of Bank of China, plans to buy a mainland brokerage firm in the hope of becoming the second Sino-foreign venture permitted to conduct securities transactions on the mainland's share markets.

Last month, China's regulatory watchdog, China Securities Regulatory Commission, granted investment bank China International Capital Corp (CICC) a brokerage licence for domestic A shares.

Li Shan, chief executive of BOCI, said it was in advanced talks to acquire a mainland brokerage house in order to participate in both primary and secondary A-share transactions.

'This brokerage firm will be a foothold for us, allowing our [future] joint-venture company to quickly commence operations in the domestic market once the CSRC gives us approval.'

BOCI is waiting for the CSRC to give it the green light to set up a Sino-foreign joint venture for trading and underwriting A-share stocks.

About two months ago, the securities watchdog gave BOCI permission to prepare the creation of a Sino-foreign joint-venture investment bank.

Foreign partners are banned from taking more than 49 per cent of Sino-foreign ventures engaged in A-share trading. It is believed BOCI will adopt a similar shareholding structure to CICC.

To comply with the foreign ownership regulation, United States investment bank Morgan Stanley and other minority foreign shareholders have reduced their combined stake in CICC to 49 per cent.

China Construction Bank, the largest shareholder in CICC together with China National Investment and Guaranty Corp, have increased their holding in the mainland investment bank from 50 per cent to 51 per cent.

BOCI is expected to take a 49 per cent stake in any future Sino-foreign joint venture.

Other potential shareholders were reported to include Dongfang Asset Management with 21 per cent and Beijing-based investment firm State Development Investment with 12 per cent.

Oil giant Sinopec, an investment arm of the Shanghai municipal government, and another firm would each take a 6 per cent stake, Reuters reported.

However, Mr Li refused to disclose the identities of the joint-venture partners.

'I believe we will receive approval from CSRC very soon,' he said.

BOCI director Fung Chi-kin would not reveal the identity of the acquisition target but said it was not one of the mainland's top 10 brokerage firms. However, he said the mainland brokerage firm had operations in 15 major cities along the coast.

Mr Li said BOCI planned to provide a full range of investment banking services in Hong Kong and China.

'Our plan is to become the premium investment bank in the Greater China region and to provide integration between Hong Kong and China stock markets.'

The new joint venture would focus on cross-border securities services, introducing mechanisms to enable more local investors to buy on overseas equity markets and offering China depository receipts once approval was granted, Mr Li said.



Bank of China unit targets mainland brokerage house