For daily news stories
visit http://www.ifre.comInternational Financing Review Asia April 4 2020 15Goldman,
Morgan get China
JV approvals
GOLDMAN SACHS and MORGAN STANLEY received
lNALûAPPROVALûTOûINCREASEûTHEIRûSHAREHOLDINGSû
in their China securities joint ventures to 51%
only a few days before ownership limits were
lNALLYûSCRAPPEDûALTOGETHER
Goldman Sachs will raise its stake in its
JV from 33% to 51% and Morgan Stanley
from 49% to 51%, the banks said in separate
statements on March 27 after receiving
permission from China’s securities regulator.
4HEûTWOû53ûlRMSûAREûTHEûlFTHûANDûSIXTHû
GLOBALûBANKSûTOûRECEIVEûlNALûSIGN
OFFûTOûHOLDû
a majority stake in their JVs. HSBC was the
lRST ûHAVINGûSETûUPûITSû*6ûUNDERûAûSPECIlCû
trade deal between China, Hong Kong and
Macau.
)Nû$ECEMBERû û5"3ûBECAMEûTHEûlRSTû
foreign bank to acquire a 51% stake in its
JV after the China Securities Regulatory
Commission lifted the ownership limit for all
foreign banks in April that year.
Nomura received the green light to set up
a 51%-owned JV from scratch in November
LASTûYEAR ûWHILEû*0û-ORGANûRECEIVEDûlNALû
approval the following month for a new JV,
having walked away from a minority stake in
a previous unsuccessful partnership.
Foreign banks have lobbied to be given
greater control over their JVs ever since
'OLDMANûSETûUPûTHEûlRSTû3INO
FOREIGNû
securities JV in 2004 in a deal with veteran
Chinese banker Fang Fenglei.
Goldman, unusually, already has day-to-
day operational control, despite its minority
position. UBS was the only other foreign bank
with such an arrangement before it increased
its shareholding to 51%.However, most foreign banks have long
bristled over the lack of control over their
JVs, which has left Chinese partners in
charge of major decisions as well as, in some
instances, holding key licences.
Several foreign banks, including most
recently Citigroup, have walked away from
unsuccessful partnerships, while those
retaining their partnerships have so far kept
ANYûINVESTMENTSûWITHûREGARDûTOûSTAFlNGûORû
assets to the regulatory minimum.
As a result, the performance of the JVs
has overwhelmingly disappointed. In 2018,
the last year for which data are available,
the seven major JVs operational at the time
recorded a combined loss of Rmb48.1m
(US$6.78m).
Citi Orient Securities was the best
performer for the third year in a row,
RECORDINGûAûNETûPROlTûOFû2MBMû
'OLDMANû3ACHSû'AOû(UAûTURNEDûAûSMALLûPROlTû
OFû2MBM ûWHILEû-ORGANû3TANLEYû(UAXINû
Securities reported a loss of Rmb99.8m.NEW RULES
Despite their underwhelming performance
to date, the change in rules in 2018 led to
a resurgence of interest with several banks
including DBS Group and Societe Generale
POISEDûTOûENTERûTHEûINDUSTRYûFORûTHEûlRSTû
time.
In addition to allowing foreign banks to
acquire 51% shareholdings in JVs, the rules
ALSOûEXPANDEDûTHEûSCOPEûOFûLICENCESûAVAILABLEû
to foreign banks, having previously limited
them to sponsorship, brokerage and research
to begin with.
Beijing went a step further last Wednesday
when it scrapped ownership limits
ALTOGETHER ûFULlLLINGûAûPLEDGEûTHATûWASû
included in its phase one trade agreement
with the US earlier this year.
China had vowed to remove ownership
limits within three years when it raised theownership cap to 51% in 2018, although
it had refrained from providing a clear
timetable until negotiations with the US over
the phase one deal began.
In addition to scrapping ownership limits
for securities JVs, the phase one deal also said
China would remove shareholding caps for
the fund management and futures sectors as
well from April 1.
BLACKROCK and NEUBERGER BERMAN became the
lRSTûlRMSûTOûIMMEDIATELYûTAKEûADVANTAGEûOFû
these rule changes after the CSRC said last
Wednesday they had both applied to set up
mutual fund businesses.
“China’s US$14trn asset management
industry is the third largest in the world,
and as the Chinese market opens to foreign
asset managers, our global reach and whole
portfolio approach will help us become the
leading foreign asset manager in China,”
"LACK2OCKûCHIEFûEXECUTIVEû,ARRYû&INKûSAIDûINûAû
statement to shareholders.
Several asset managers including Fidelity
International, Bridgewater Associates
and Vanguard have already set up wholly
foreign-owned enterprises, although this
currently limits them to marketing onshore
investment products to Chinese institutions
and high-net-worth individuals.
The phase one trade deal includes further
liberalisation measures such as allowing US
asset management companies to acquire
non-performing loans directly from banks for
THEûlRSTûTIMEû/AKTREEû#APITALûSUBSEQUENTLYû
set up a subsidiary in February to invest in
Chinese distressed debt.
The agreement also states that China
will approve any applications from US
credit rating agencies by April at the latest.
)Nû*ANUARYûLASTûYEAR û30ûBECAMEûTHEûlRSTû
of the big three to receive approval with
applications from Fitch and Moody’s still
pending.
THOMAS BLOTTPlease contact us if you have information about job moves: [email protected] MUFG BANK, the
commercial banking
arm of Mitsubishi
UFJ Financial Group,
has appointed Pierre
Ferland as co-head
of global markets for
Asia, effective last
Wednesday.
Ferland, who is based
in Hong Kong, is
co-head alongside
Teruhisa Fukushima
and will eventuallytake over as sole
head. It was not
immediately clear
what Fukushima’s
new role will be.
Ferland was
previously Asia head
of sales and trading
at MUFG Securities,
MUFG’s brokerage
arm, and until last
month Asia CEO.
He was previously
with RBS for 20 years. KKR has hired
Hidekazu Harada from
Bank of America as
managing director
in its private equity
team in Tokyo.
Harada worked at
BofA for 16 years
including as co-head
of Japan investment
banking from
2016 onwards. At
BofA, he primarily
covered M&A deals,management buyouts
and leveraged
finance, particularly
for financial sponsors
and in the technology,
media and
telecommunications
sector.
Prior to BofA, he
worked at Daiwa
Securities for four
years in Tokyo and
then in London. He
also worked at PwC.B 3 HRSOHDQG 0 DUNHWVLQGG