The Royal Bank of Scotland Group (RBS) and its Chinese partner Guolian Securities announced the launch of their joint venture late on Monday. The new China brokerage house, Huaying Securities, plans to cash in on the boom in investment banking in China. At the same time, Founder Securities, the Chinese joint venture partner of Credit Suisse, received approval on Monday for its IPO.
Reuters reported that RBS is just the latest in a line of foreign companies that hunger for a share in the underwriting business in China's booming economy. In January, both JPMorgan and Morgan Stanley received approval for joint ventures as well from the country's securities regulator, allowing them to underwrite Chinese stocks and bonds. Prosperity looms large in an economy that in 2010 became the world's largest IPO market, with participating companies bringing in a record $70 billion in funds.
In advance of a launch ceremony scheduled for Wuxi, an eastern Chinese city near Shanghai, the two companies issued a joint statement. "From today, Huaying is licensed to underwrite and sponsor stocks and bonds issued in mainland China, tapping China's huge and growing investment banking market," they said. UBS will hold a one-third stake; that is the most Chinese law will allow an outside company to hold in a brokerage joint venture.
The influx of foreign companies through joint ventures seems poised to change the way the country does business. Small- and medium-sized companies took advantage of the launch of China's Nasdaq-style Chinext market to take themselves public. Their business was readily scooped up by smaller Chinese companies that dominated last year's underwriting business, with such domestic banks as Ping An Securities, based in Shenzen, and Guosen Securities taking the lion's share of business.
UBS, however, plans to triple the size of its research team to 100 people by the middle of 2012 and intends to position itself within the IPO market.
Credit Suisse's local partner, Founder Securities, will take itself public in what may be the largest IPO yet. Founder plans to sell 1.5 billion shares to raise 10 billion yuan ($1.5 billion), and received regulatory approval on Monday as well. Founder Securities, the country's 16th largest securities firm by revenue, is based in HunanProvince. Ping An Securities will be the sponsor and both Ping An and Citic Securities have been appointed lead underwriters for the offering.