Credit Suisse said yesterday it had won a business permit from China's stock market regulator for its mainland joint venture with Founder Securities in a move to tap the country's investment banking market.

The Swiss bank became the first overseas financial institution to obtain the operation license after China issued new rules over Sino-foreign stock ventures in December 2007, it said in a statement.

Credit Suisse will hold a 33.3-percent stake in the joint venture, while the Hunan Province-based Founder Securities will own the remainder.

The securities venture will initially sponsor and underwrite yuan-backed A shares as well as government and corporate bonds in China.

The move by Credit Suisse to enter China's mainland capital market came at the end of a year in which China's stock sales fell sharply amid the ongoing global financial crisis, denting investment banks' revenues.

Chinese companies raised US$21.83 billion in initial public offerings in the first 11 months, which was down 75.3 percent from a year before and the lowest level in three years, according to Zero2IPO, a venture capital service provider.

"China's domestic investment banking services market has long been a coveted crown jewel for many global banks," said Kai Nargolwala, Credit Suisse chief executive officer in the Asia Pacific region, in the statement. "The investment case for China has not changed for us despite current market sentiment."

Credit Suisse signed a memo of understanding with Founder Securities on the joint venture in December 2007 and won the green light from the Chinese regulator in June 2008.

"Although mainland stock sales won't rebound much next year, the market is still appealing due to its growth potential," said Wu Ke of Zhongtian Investment Consulting. "Every foreign player wants to be an early bird."

In December 2007, China unveiled regulations on foreign participation in domestic securities companies, allowing more overseas institutions to form joint ventures with domestic counterparts.

Foreign investors can hold a stake of up to 33.3 percent in an investment-banking venture, and are allowed to buy stakes of up to 20 percent in domestic stock brokers.

So far, nearly a dozen overseas companies including Goldman Sachs, Morgan Stanley and UBS AG have set up securities joint ventures on the Chinese mainland.

(Shanghai Daily December 31, 2008)