JP Morgan and Nomura top brokerages in China as market access grows

SHANGHAI / HONG KONG (Reuters) – JP Morgan and Nomura have been approved by the Chinese authorities for the creation of majority-owned brokerage joint ventures as part of China's latest attempt to open its financial sector to foreign companies.

The Securities Regulatory Commission of China announced on Friday that it would continue to "effectively" approve foreign brokerage joint ventures after announcing its decision for both banks.

Allowing foreign banks to take control of joint ventures in the securities sector is an essential part of China's pledge to reduce ownership restrictions, particularly in the $ 1 trillion financial sector.

Lack of control and limited revenue contribution have long been a source of frustration for Western investment banks and one of the reasons for JP Morgan's decision in 2016 to sell its 33% stake in its then Chinese joint venture.

Western banks, including Goldman Sachs, Morgan Stanley and Credit Suisse, operate joint ventures, whose offerings include debt and equity underwriting and financial advisory, with varying degrees of operational control.

In November, Beijing authorized UBS to hold a majority stake in its securities joint venture, making it the first foreign bank to do so under the new rules announced in 2017.

COMPLETE SERVICES

Last year, JP Morgan and Nomura asked for the creation of joint ventures under majority control in China. But unlike UBS, neither of the two joint ventures was created on the continent and should start from scratch.

The majority-owned share deal will allow JP Morgan to further strengthen its China operations and offer "a full package of services and solutions" to its customers, Wall Street said in a statement.

"This is an essential part of our growth plans globally and in the Asia-Pacific region," said Nicolas Aguzin, President and CEO of JP Morgan for the Asia-Pacific region.

Nomura said its joint venture in China would initially focus on the wealth management business and expand its offering "with the ultimate goal of developing the business into a full-fledged brokerage business".

"With an increased presence in China, we aim to support economic growth in China and Japan and firmly establish ourselves as a deep-rooted global financial services group in Asia," said Nomura CEO Koji Nagai.

Recent approvals for better access to foreigners, from insurance to badet management, come in the context of an uncontrolled trade war with the United States, with increased access to the financial sector among a crowd of Washington demands.

Prime Minister Li Keqiang said on Thursday that Beijing will expand market access for banks and foreign insurance and securities companies, especially in the financial services sector.

In recent years, China has allowed many foreign financial companies to start new businesses abroad or to strengthen their presence through majority ownership in joint ventures.

In addition to UBS, HSBC also holds 51% of its securities business in China, which was launched in 2017, but the Asia-based bank does so under rules allowing special access to companies based in Hong Kong.