Banking & Finance

Credit Suisse shrugs off China jitters, launches onshore securities brokerage joint venture

While some international banks are pivoting away, Credit Suisse ratchets up services targeting institutional investors in China ahead of possible inclusion of A-shares in the MSCI

PUBLISHED : Tuesday, 01 November, 2016, 11:33pm
UPDATED : Wednesday, 02 November, 2016, 11:36am

Credit Suisse is ploughing ahead with its China ambitions, a stance that leaves the Swiss bank at odds with rival banks which in some instances are pivoting away from the mainland after years of unsuccessful operations or disputes with their joint venture partners.

Credit Suisse is set to announce on Wednesday that its onshore securities brokerage business in China has started trading through its joint venture, Credit Suisse Founder Securities.

Credit Suisse’s head of equities greater China, Nicole Yuen, told the Post that the new business would target institutional investors both on the mainland and internationally.

“We have been rushing against time get the brokerage business operational before the MSCI includes A-shares in its emerging market indices,” Yuen said.

“Even if MSCI inclusion does not happen in June we have enough QFII and RQFII quotas to trade very actively.”

Credit Suisse Founder Securities, based in Beijing, operates its newly launched brokerage business in Shenzhen’s Qianhai economic zone on September 30, but the official launch will take place in Shenzhen on Wednesday.

The announcement comes at a time when many international banks are reconsidering the value of their mainland joint ventures.

In October, JP Morgan said that it was in talks with its Chinese partner to sell back its stake in its joint venture securities business JP Morgan First Capital, after three years of lacklustre profits.

Most international banks’ securities joint ventures on the mainland offer debt and equity markets services, which have come under pressure as both the number of initial public offerings, and foreign banks’ share of these offerings have fallen.

“In the past three to five years, banks have been considering what it is that they are good at, and what China means to them,” said Keith Pogson, a senior partner in EY’s financial services practice.

“For a bank with large private banking operations, it makes sense to have a securities JV in China, and the same is true for a commercial bank. As to the rest, they are starting to think ‘should I stay or should I go.’”

Yuen said the new operations cannot be benchmarked against older joint ventures.

“Past precedents don’t really apply to us in this, as equity securities brokerage is a new space,” Yuen said.

Bank of East Asia and HSBC said earlier this year that they are hoping to set up joint venture brokerage firms in Qianhai, while onshore operations at UBS and Goldman Sachs already offer brokerage trading.

Credit Suisse chief executive Tidjane Thiam’s current policy is for the bank to put greater focus on wealth management than investment banking, and also to expand its services further in Asia.

“We disagree with the thinking leading from some players of withdrawing from Asia,” Thiam said in a July interview.

The new brokerage services should also support Credit Suisse’s wealth management activities, Yuen said.

“Equities brokerage services are one of the key foundations of a successful wealth management platform.”