Photographer: Qilai Shen/Bloomberg
HSBC Plans to More Than Double Staff at China Securities VentureBy and
CEO expects demand for investments in China to drive growth
Sun, head of research, sees ‘six major sectors’ to watch
HSBC Qianhai Securities Ltd., the first foreign majority-owned securities joint venture in China, expects to more than double the size of its team in the next four years as it sees economic growth continuing to attract investments to the country.
The firm, launched last year to help institutional clients access Chinese capital markets, expects to have 300 staff, up from 120 currently, Chief Executive Officer Irene Ho said in an interview in New York on March 5. “I just need to see the money coming in,” she said.
London-based HSBC Holdings Plc received approval in June to invest 918 million yuan ($145 million) for 51 percent of a venture with Qianhai Financial Holdings Co. The venture conducts equity research and brokerage activities on locally listed securities, equity and debt underwriting and sponsoring, and advises on domestic and cross-border corporate mergers and acquisitions.
“Unlike other joint ventures where a foreign entity owns a minority stake in China, we can publish research reports in mainland China and help clients trade directly through Shanghai and Shenzhen stock exchanges since we are members,” Ho said.
Regulations that limit foreign investment banks to minority stakes in joint ventures largely excluded the firms from lucrative businesses such as secondary-market trading in Chinese debt and equities, as well as from managing money for wealthy clients.
The issue of control contributed to JPMorgan Chase & Co.’s decision to sell its stake in JPMorgan First Capital Securities in late 2016 after six years in the venture. CEO Jamie Dimon said in June that the lender is seeking to find a new structure that would eventually give it full control.
The joint venture in Qianhai will primarily cover “new economy sectors,” which will be instrumental in driving the Chinese economic transformation in the next five to 10 years, said Steven Sun, head of research at the joint venture. He said the firm’s focus will be on six sectors: IT hardware and software, advanced manufacturing, green industries, health care, consumer products and the internet.
The venture’s team of 15 researchers may reach 50 people over the medium-term, according to the company.
The Shanghai Composite Index slumped 7 percent in February in dollar terms, among the worst-performing indexes in the world for that month. Hong Kong and mainland China shares “are going through transformation in the sense that more and more new-economy companies will get listed,” Sun said in an interview.
Sun sees opportunities in companies that have a market value of 20 billion to 50 billion yuan, and among stocks that have growth at a reasonable price.
“There are quite a few in the six major sectors,” Sun said. “If you take a medium-term outlook for next one to three years, China remains very constructive. What’s driving the market and economy will be the six selected sectors.”