Credit Suisse (CS) Plans to Take 100% Ownership in China JV

As China opened its financial markets to foreign firms, with the removal of restrictions on ownership effective Apr 1, Credit Suisse CS is mulling to buy the remaining 49% stake in its China securities joint venture. The news was reported by Reuters.

Credit Suisse Founder Securities (“CSFS”) was formed in 2008 as a JV between Credit Suisse and Founder Securities. The JV provides various capital markets with services to clients in the domestic China market, which includes sponsoring and underwriting A shares, foreign investment shares, and government and corporate bonds along with financial advisory services.

In early June, the Swiss bank raised its shareholding in JV to 51% from 33.3%.

The development follows the opening up of the China markets for foreign financial firms. China’s securities regulator — The China Securities Regulatory Commission (“CSRC”) — removed restrictions on foreign ownership. Notably, it now allows foreign companies to take full control in securities JVs by buying out their local partners or setting up their money management and investment banks.

The article reported that Credit Suisse is looking to increase market share in China, as it eyes significant business opportunities in the China economy.

"We will continue to invest across our platforms in China and closely integrate our onshore operations with our businesses in Hong Kong and across the region. There will be more hires, some of which we will announce shortly," the article quoted Helman Sitohang, CEO for Credit Suisse Asia Pacific.

Several companies have been rushing to grab a share of China’s appealing market. In mid-June, JPMorgan JPM received regulatory approval from the CSRC to increase its stake to 100% from 49%. Thus, the Wall Street biggie will operate the first fully foreign-owned futures business in China.

Further, in May, HSBC Holdings HSBC entered a deal to buy the remaining 50% stake in its China life insurance JV from The National Trust Limited. Also, two major global investment banks — Goldman Sachs GS and Morgan Stanley — have received a nod from the commission to increase stake in their mainland securities JVs to 51%.

Shares of Credit Suisse have lost 23.6% over the past six months compared with the industry’s decline of 31.3%.

Currently, the company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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