The China Securities Regulatory Commission has given Credit Suisse the go-ahead to launch a joint venture with local firm Founder Securities. The Swiss bank takes a 33% share in the new entity, which will be able to sponsor and underwrite A shares, foreign investment shares and government and corporate bonds. The firm will not be able to offer secondary market services such as research and broking, however: under new regulations announced in 2007 Sino-foreign joint ventures must show a track record of five years’ unblemished service before being able to expand their activities.
Credit Suisse has already made some headway in China through its Shanghai representative office, ranking fifth on the Dealogic league table for equity bookrunners for financial year 2007 with 24 deals and a market share by value of 5.32%. That puts it in a large group of peers with similar market shares, as compared with top-three banks Morgan Stanley, Goldman Sachs and UBS, all of which have more established presences in China and each of which commands more than 10% of equity capital markets share. Those three top players all have established joint ventures of their own, and Credit Suisse and Founder Securities will be hoping to break into the 10% market-share club now that they are following suit.
Euromoney understands that the two firms have been in talks since last summer, with a memorandum of understanding signed in January. A spokesperson for the firm said that it had yet to decide on a name for the new entity. The joint venture will be run from Beijing and will be headed by Neil Ge, previously managing director at Credit Suisse’s Shanghai office. Lei Jie, chairman of Founder Securities, will take on the role of chairman.
The announcement of the Credit Suisse-Founder Securities joint venture follows the news on June 16 that CLSA had met the five-year requirement and its 33%-owned Sino-foreign joint venture, CESL, now has a securities broking licence (restricted to the Yangtze River Delta area) and a securities investment consultancy licence. CLSA, a brokerage, investment banking and private equity group headquartered in Hong Kong, says that the licence permits CESL to offer full-service research, sales and broking services for local and offshore clients wishing to trade A shares on the Shanghai and Shenzen stock exchanges.
