Goldman Sachs applies to take controlling stake in China securities joint venture

By Li Qiaoyi Source:Global Times Published: 2019/8/21 21:08:41

A view of a sign for Goldman Sachs at the New York Stock Exchange in November 2018 Photo: IC

US banking giant Goldman Sachs has applied to take a controlling stake in its securities joint venture (JV) in China, a fresh sign that the world's second-largest economy continues along the path of financial opening-up despite lingering trade woes with the US.

The timing of the application also hints that it might become a bargaining chip for China in trade talks with the US, an industry analyst said.

A Goldman Sachs spokesperson confirmed to the Global Times on Wednesday that "we have submitted an application to the China Securities and Regulatory Commission (CSRC) to increase our ownership of Goldman Sachs Gao Hua Securities Co from 33 to 51 percent."

Beijing Gao Hua Securities holds the remaining 67 percent of the joint venture, which was launched in 2004. 

The CSRC received the securities JV's application materials on Monday, Chinese news site reported on Wednesday. The securities regulator has yet to publicly comment on the application. 

"The move attests to the fact that China is honoring its promise to further open up its financial sector, a critical part of the nation's opening-up at large," Wu Jinduo, head of fixed income at the research institute of Great Wall Securities, told the Global Times on Wednesday.

As part of the guidelines for foreign investment in Chinese securities firms, which were released by the CSRC in April 2018, the cap on foreign shareholdings was raised to 51 percent from previous 49 percent.

That foreign brokerages are willing to up their stakes in China's market also shows that foreign investors are still bullish on China's growth prospects, she said.

The flagship Shanghai Composite Index edged up 0.01 percent, or 0.33 points, to close at 2,880.33 points on Wednesday. The index has climbed about 15 percent year to date.

With this move, the Wall Street banking giant seeks to join its global peers in tapping into China's equity market, which remains largely unexplored by foreign investors. 

Japanese brokerage and investment bank Nomura Holdings Inc and US financial giant JPMorgan Chase won approval from the CSRC to set up majority-controlled securities joint ventures in China, the regulator announced in late March.

UBS AG became the first foreign bank to take a majority stake in a Chinese brokerage JV in November 2018 when the Switzerland-based bank raised its shareholding in its securities JV, UBS Securities Co, from 24.99 percent to 51 percent.

Domestic brokerages will face greater competitive pressure, commented Wu at Great Wall Securities. The availability of an increasing number of foreign-controlled brokerages might result in a sector-wide consolidation, she said, adding it would affect the nonbanking sector, especially securities stocks, negatively.

The analyst also noted that Goldman Sachs' application, which comes amid the ongoing trade dispute between Beijing and Washington, might translate into a China-US trade talks bargaining chip.

Posted in: COMPANIES

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