US financial services firm Morgan Stanley plans to sell its
entire stake in China International Capital Corp (CICC), the
nation's first investment bank, sources close to the two companies
said yesterday.
The unnamed sources confirmed a report by Hong Kong-based Ta
Kung Pao that the US investment bank plans to sell its stake in
CICC and is in talks with private equity firms to find a buyer. The
two firms have agreed that the buyer of the stake cannot be an
investment bank.
Morgan Stanley currently holds a 34.4 percent stake in CICC, but
with a limited role in the investment bank. The sources said the US
firm might sell its entire stake in CICC and invest in another
local brokerage.
Earlier in December, local media reported that the global
financial services firm was planning to buy a 33.5 percent stake in
Shanghai-based China Fortune Securities for 4 billion yuan.
The reports said Morgan Stanley had signed an agreement with
China Fortune Securities to set up a joint venture investment bank
and that Morgan Stanley might be interested in a controlling
stake.
But under new rules issued by the China Securities Regulatory
Commission (CSRC) on December 28, the maximum stake foreign
investors can hold in a local securities firm will remain at around
33.3 percent, despite lower barriers in other areas.
China Fortune Securities ranks 48th among 104 brokerages, with
registered capital of 1 billion yuan by the end of 2006, according
to the CSRC.
The CSRC's new rules issued on December 28 also require 1.2
billion yuan in net capital in the last year for a securities firm
if it wants to set up a subsidiary.
"To meet the requirement, Morgan Stanley and China Fortune might
increase their net capital before they set up a joint venture
investment bank," said Liang Jing, an analyst with Guotai Jun'an
Securities. "The new rule may not be a big problem for Morgan
Stanley and China Fortune."
Morgan Stanley is expected to become one of the first foreign
firms to invest in a local securities firm in 2008, after the
government resumed approvals of foreign joint ventures based on the
China-US Strategic Economic Dialogue.
The government banned international companies from investing in
local securities firms in October 2006, concerned that it would
threaten local brokerages recovering from a four-year slump. Before
the ban, UBS and Goldman Sachs Group Inc were the only foreign
firms with brokerages in the country.
China's securities industry scored big money last year thanks to
the bullish stock market. By June 2007, 24 leading brokerages had
made a total net profit of 37.9 billion yuan, a year-on-year
increase of 425 percent.
Shanghai-listed CITIC Securities yesterday predicted fivefold
net profit growth for 2007 compared with 2006. The company posted a
net profit of 2.4 billion yuan in 2006.
(China Daily January 8, 2008)
