Morgan Stanley, UBS to raise stakes in China securities JVs to 49 per cent

HONG KONG: Morgan Stanley and UBS Group AG are set to raise their stakes in separate Chinese securities joint ventures to 49 per cent, people with direct knowledge of the moves said, betting on strong deals momentum in the world’s second-largest economy.

China allowed foreign banks to boost share holdings in securities joint ventures to a maximum 49 per cent in 2012 from the previous cap of a third to help modernise the country’s capital markets.

Foreign investments banks with securities joint ventures in China, however, have not as yet raised their stakes as most of the ventures were small or struggling to break even due to sluggish onshore deals.

But the prospect of China moving soon to allow global banks to own majority stakes in securities joint ventures and growing volumes of equity issuance and trading businesses have motivated some foreign banks to explore raising their holdings.

“The China securities market is ripe for growth, and foreign investment banks will look to put more money there when it comes to boosting revenue. It’s a longterm bet,” said Benjamin Quinlan, CEO of consultancy Quinlan & Associates.

Morgan Stanley and its Chinese joint venture partner, Huaxin Securities, have agreed to a proposal to raise the US investment bank’s stake in the venture to 49 per cent from 33.3 per cent, two people with knowledge of the plan said.

The stake increase by Morgan Stanley is awaiting approval from the Chinese securities regulator, one of the sources said.

Swiss bank UBS, which registered its Chinese securities joint venture in 2006, is also in talks to raise its stake in UBS Securities to 49 per cent from 25 per cent, two separate sources told Reuters.

One of the sources with knowledge of the UBS plans said the bank expected the process to be completed later this year.

All the people declined to be named as the details of the stake hikes were not public yet.

Spokesmen for Morgan Stanley and UBS declined to comment.

News of the plans was first reported by the Wall Street Journal. — Reuters