Credit Suisse Group AG (CSGN) plans to boost capital at its Chinese joint venture and apply for a stock trading permit in the country, as the government loosens restrictions on foreign investment banks.
Credit Suisse will move bankers to China to take advantage of higher ownership limits and a shorter wait for a license to trade shares in Shanghai and Shenzhen, said Zhang Liping, the bank’s chief executive officer for the country. Credit Suisse started a joint venture in December 2008 with Founder Securities Co.
China agreed last week to let foreign investment banks raise their stakes in domestic joint ventures to 49 percent from 33 percent, and to shorten the qualification period for a trading license to two years from five. Restrictions on overseas firms have prevented Credit Suisse and rivals such as Citigroup Inc. from fully taking advantage of a three-fold gain in the size of China’s stock market since the end of 2006.
“We’re going to put in more people and resources and lots of attention” on the Chinese joint venture, Zhang said yesterday in an interview. “More specifically, we’re going to transfer more experienced bankers to our JV. The new rules give flexibility to do much more.”
Credit Suisse currently has about 100 employees at its joint venture in Beijing. Zhang didn’t specify how many people he plans to hire or transfer. The bank is in talks with its local partner on preparing the trading application, he said, adding that no final decision has been made on increasing its stake in the venture, Credit Suisse Founder Securities Ltd.
Goldman Sachs Group Inc. and UBS AG are the only foreign firms to have management control of their local ventures. The two banks got their underwriting licenses in China before the government put a moratorium on new joint ventures in September 2006.
Credit Suisse, based in Zurich, was the first foreign bank to establish a local joint venture after the ban was lifted at the end of 2007. JPMorgan, Morgan Stanley, Deutsche Bank and Citigroup followed. Barclays Plc is considering more than a dozen potential partners for an investment-banking venture, the South China Morning Post reported today, citing unidentified people. Barclays spokesman Tim Cuffe declined to comment.
Overseas firms have struggled to make inroads into China’s stock and bond underwriting markets. Global financial companies and their local partners accounted for less than 3 percent of total corporate bond sales in China this year, according to data compiled by Bloomberg. UBS Securities Co.’s 2.5 percent share of equity underwriting is the biggest among foreign-backed ventures, the data show.
No. 1 Focus
Credit Suisse’s venture hasn’t arranged a stock sale in China since August, when it helped Founder Securities raise 5.85 billion yuan ($610 million) in an initial public offering. Its latest debt deal was a 3 billion yuan bond sale in December by XCMG Construction Machinery Co.
Credit Suisse ranks sixth in equity offerings globally this year, data compiled by Bloomberg show.
Seeking a trading license is Credit Suisse’s “number one” focus, said Zhang. The bank also plans to strengthen its cross- border mergers advisory, he said.
Goldman Sachs has forecast that the value of firms trading on Chinese bourses will swell to $41 trillion in 2030, surpassing the U.S. as the world’s largest equity market. Sales of corporate bonds and shares in the country have surged as companies sought funds to take advantage of an expanding economy.
Foreign-backed joint ventures seeking trading permits in China need to fulfill a set of requirements, including two years of profits. Credit Suisse Founder Securities meets those conditions, Zhang said.
The relaxed rules on foreign firms, announced as part of the annual Strategic and Economic Dialogue talks between the U.S. and China last week, reflects the securities regulator’s push to bolster the quality of China’s financial industry, according to Zhang.
“If you commit more capital and resources, that means more international practices will be brought into the venture,” Zhang said. “That’s the whole purpose of the CSRC allowing greater participation,” he said, referring to the China Securities Regulatory Commission.
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