IFR Asia – December 08, 2018

People

&Markets

UBS's majority stake spurs JV activity

Global banks jockey for position after CSRC green light

International banks are vying to grab a

bigger share of China’s domestic capital

markets after UBSûBECAMEûTHEûlRSTûFOREIGNû

bank to take a majority stake in a securities

joint venture under new rules introduced

earlier this year.

SOCIETE GENERALEûCONlRMEDûTHATûITûhPLANSû

to set up its securities business in China via

a local joint venture” in a statement to IFR

last week. It joins the likes of DBS Group

and Nomura, which have already applied to

ENTERûTHEûMARKETûFORûTHEûlRSTûTIMEûTHROUGHû

new securities JVs.

China’s securities regulator said in a

statement on November 30 that it had

granted the Swiss investment bank

approval to raise its stake in UBS Securities

to 51% from its current shareholding of

24.99%.

h4HEûFURTHERûOPENINGûUPûOFû#HINASû

lNANCIALûSECTORûREPRESENTSûGREATû

opportunities for our wealth management,

investment bank and asset management

businesses,” UBS chief executive Sergio

Ermotti said in a statement.

h3INCEûESTABLISHINGûOURûONSHOREûPRESENCEû

in 1989, we have been at the forefront

OFûFOREIGNûINVESTMENTûINû#HINAû4HISûSTEPû

underlines our long-term commitment to

this market and we will continue to pursue

opportunities.”

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Securities Regulatory Commission comes

ASûRIVALûlRMSûAREûLOOKINGûTOûINCREASEûTHEIRû

shareholdings in their JVs to 51% or set up

new partnerships from scratch in which

they will have majority control.

5"3ûBECAMEûTHEûlRSTûTOûSHOWûITSûHANDûINû

May when it applied to increase its stake to

51% and was followed shortly by Morgan

Stanley, which currently holds a 49% stake

in Morgan Stanley Huaxin Securities. Credit

Suisse is also renegotiating its stake in CS

Founder Securities.

JP Morgan, which walked away from its

partnership with First Capital Securities

in 2016, has applied to set up a new JV,

while Citigroup is looking to exit from its

partnership from Orient Securities in order

to set up a new one.

h4HEûRULEûCHANGESûnûBOTHûTHEûLIFTINGûOFû

the foreign ownership cap and the removal

OFûSOMEûOFûTHEûBUSINESSûSCOPEûRESTRICTIONSûnû

have prompted a lot of banks to look again

at their onshore strategies,” said Benjamin

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Associates.

h&ORûTHOSEûBANKSûWITHûPARTNERSHIPSû

already in place, whether this will involve

applying to raise their stakes or setting up

GREENlELDû*6SûWILLûVARYûONûAûCASE

BY

CASEû

basis. We expect to see a lot more new

entrants going forward though.”

RENEWED PUSH

Following several years of inertia,

international banks have been showing

signs of commitment to growing their

presence onshore even before receiving

approval from the CSRC to raise their

stakes in their JVs.

In June, JP Morgan said it intended

to grow its China investment banking

HEADCOUNTûBYûnûOVERûTHEûNEXTûTWOû

to three years and also announced plans

to revamp its coverage model in order to

prioritise technology.

UBS also merged its Greater China

investment banking team following its

application to increase its stake in May.

Xuewen Bi, head of corporate client

solutions at UBSS, and Asia vice chairman

John Lee were appointed co-heads of the

new group.

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TOP STORY BANK STRATEGY

Who’s moving where...

„ GOLDMAN SACHS has

elevated two senior

bankers to co-chief

operating officers

of its investment

banking division in

Asia Pacific ex-Japan.

Aaron Arth (pictured),

head of the financing

group in APAC, and

Iain Drayton, regional

head of the financial

and strategic

investors group,

will take up the new

positions in addition

to their current roles.

Both report to Todd

Leland, head of APAC

investment banking

services.

Last month, Goldman

named new co-heads

of its equity and

debt capital markets

businesses in Asia,

promoting four

internal managers.

„ Former Barclays

Asia Pacific co-

head of investment

banking Patrick

Kwan has rejoined

the industry with

CREDIT SUISSE after

a brief stint with

beleaguered Chinese

conglomerate HNA

Group.

Kwan joined as

managing director

and a vice chairman

of investment

banking and capital

markets for APAC

after less than 18

months as chief

investment officer at

HNA International,

the Hong Kong-based

subsidiary of HNA

Group.

Kwan began his

career at Goldman

Sachs.

“For those banks with partnerships already in place, whether this

will involve applying to raise their stakes or setting up greenfield

JVs will vary on a case-by-case basis. We expect to see a lot more

new entrants going forward though.”