HSBC Wins Approval to Operate Majority-Owned Joint Venture in China

By Julie Steinberg Features Dow Jones Newswires

HSBC Holdings PLC has received regulatory approval to operate a majority-owned joint-venture securities company based in China, the first foreign bank to win such a setup.

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The joint venture with Qianhai Financial Holdings Co. Ltd., a state-owned financial company, will be called HSBC Qianhai Securities Limited and will be based in Shenzhen, HSBC said Friday. The U.K. lender had been waiting since November 2015, when it announced plans for the joint venture, for approval from the China Securities Regulatory Commission.

The joint venture will conduct stock research, underwriting of stocks and bonds and advising on domestic and outbound mergers and acquisitions, HSBC said, and is expected to launch by the end of the year.

Foreign banks generally aren't allowed to have majority control of their joint-venture businesses with local brokerage firms in China. They are capped at 49% of such ownership and most are restricted from trading domestic securities. Banks, including Goldman Sachs Group Inc., have clamored for years to get control of the businesses, hoping to reap more of the profits and be able to make more decisions on a local level.

Beijing has signaled it is open to gradually allowing investment firms to have greater stakes, but so far the cap has remained in place. HSBC was able to secure a majority stake under an arrangement between Hong Kong and mainland China designed to encourage trade and economic cooperation.

Under that arrangement, Hong Kong-funded financial institutions such as HSBC that satisfy various criteria are allowed to set up one such company each in Shanghai, Guangdong Province and Shenzhen. The Hong Kong-funded financial institutions can own up to 51% of the joint venture.

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HSBC has been deploying capital to fund growth in the Pearl River Delta, an area of southern China adjacent to Hong Kong.

Separately, Bank of East Asia Ltd. also said Friday it had received approval to operate its own joint-venture, East Asia Qianhai Securities Company Limited. Bank of East Asia will have a 49% stake in the company, which will also be based in Shenzhen.

Write to Julie Steinberg at julie.steinberg@wsj.com

(END) Dow Jones Newswires

June 30, 2017 11:47 ET (15:47 GMT)