Morgan Stanley, UBS to raise stakes in China securities joint ventures to 49 percent: sources

Mon Jan 9, 2017 5:01am EST
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By Sumeet Chatterjee and Elzio Barreto

HONG KONG (Reuters) - Morgan Stanley (MS.N: Quote) and UBS Group AG (UBSG.S: Quote) are set to raise their stakes in separate Chinese securities joint ventures to 49 percent, 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 holdings in securities joint ventures to a maximum 49 percent in 2012 from the previous cap of a third to help modernize its capital markets.

However, foreign investments banks did not raise their stakes as most of the securities joint ventures in China were small or struggling to break even due to sluggish onshore deals.

But the prospect of China soon allowing 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 long-term bet," said Benjamin Quinlan, CEO of consultancy Quinlan & Associates.

Morgan Stanley and its Chinese partner, Huaxin Securities, have agreed to a proposal to raise the U.S. investment bank's stake in their joint venture to 49 percent from 33.3 percent, two people with knowledge of the plan said.

This is awaiting approval from the Chinese securities regulator, one of the sources said.

UBS, which registered its Chinese securities joint venture in 2006, is in talks to hike its stake in UBS Securities to 49 percent from 25 percent, two separate sources said.   Continued...

The logo of Morgan Stanley is seen at an office building in Zurich, Switzerland September 22, 2016.  REUTERS/Arnd Wiegmann/File Photo