Credit Suisse China Investment Bank Venture Approved
Saturday, June 14 2008 (Bloomberg) -- Credit Suisse Group said China's
securities regulator approved its investment-banking venture, letting the
second-biggest Swiss bank participate in the domestic stock underwriting market
that topped $68 billion last year.
The Zurich-based bank owns 33.3 percent of the venture, and Founder Securities
Co. owns the rest, Credit Suisse said in an e- mailed statement today. It will
also be able to underwrite foreign-currency shares, and government and
corporate bonds.
China's market generated a record $1.2 billion in equity underwriting fees last
year, according to data compiled by Bloomberg. The approval is the first since
China announced rules in December that retained its 33 percent cap on foreign
ownership of investment banks and restricted participation to publicly traded
brokerages.
``This is a very important milestone in the implementation of Credit Suisse's
ambitious Asia-Pacific growth strategy, particularly for a vitally important
country like China,'' Kai Nargolwala, chief executive officer of Credit Suisse
Asia Pacific, said in the statement.
Lei Jie, chairman of Founder Securities, a unit of Beijing- based Founder
Group, was appointed chairman of the investment bank. Neil Ge, a managing
director of Credit Suisse's investment banking in Shanghai, was named CEO.
Resisting Competition
New York-based Goldman Sachs Group Inc. and Zurich-based UBS AG, the biggest
Swiss bank, so far are the only global securities firms with management control
of investment-banking units in China. UBS's China venture was the third-largest
arranger of domestic stock offerings last year, with 13 percent market share.
China has resisted opening its market further to foreign competition. Shielding
the domestic brokerage industry from Wall Street firms has helped make
Beijing-based Citic Securities Co. Asia's biggest brokerage by market value.
Founder Securities ranked 19th among China's 102 brokerages for the value of
stock, mutual fund, bond and options transactions last year, according to the
Securities Association of China, an industry group supervised by the China
Securities Regulatory Commission.
Founder Group owns five companies listed in China, Malaysia and Hong Kong and
more than 20 businesses and joint ventures, according to its Web site. The
company, which employs 20,000, said it has branched out from its roots in
information technology to health care and pharmaceuticals. It bought Founder
Securities, previously called Zhejiang Securities, in 2002.
Morgan Stanley
China's securities regulator has been encouraging smaller securities companies
to increase market share through mergers and acquisitions, according to a
report by the regulator published in January.
The approval of the Credit Suisse venture allows the Swiss firm to leapfrog
rivals Morgan Stanley and Citigroup Inc. in grabbing a slice of China's
domestic equity underwriting.
Chinese stocks had their biggest weekly decline on record this past week,
dragging the benchmark index below 3,000 for the first time since April 2007,
on concern government policies to curtail inflation will hurt profits.
Morgan Stanley signed a preliminary agreement with Fortune Securities last year
to form a venture, which has yet to be approved by the regulator. The U.S. bank
already owns 34 percent of China International Capital Corp., the first
Sino-foreign securities venture, as a passive investor.
