Banking

MS to offload stake in CICC joint venture

(China Daily)
Updated: 2010-12-10 10:29

BEIJING - Morgan Stanley will sell its 34.3 percent stake in China International Capital Corporation (CICC) to four shareholders, ending a 15-year investment in the first joint venture investment bank in China.

TPG Capital, Kohlberg Kravis Roberts & Co, the Government of Singapore Investment Corporation Pte Ltd and The Great Eastern Life Assurance Company Limited will take over the stake, CICC said on Thursday.

CICC has received regulatory approval for the transaction. "The change in our shareholding will have a very positive strategic impact on CICC and benefit its long-term development," said CICC's Chairman, Li Jiange, in a statement.

Li said the introduction of prominent international institutional investors will help CICC in its future business development and international expansion.

Morgan Stanley expected a pre-tax gain of about $700 million from the transaction, that may be finalized by the end of this year, the company said.

"Given the impressive economic and market developments and business opportunities, China remains a critical part of Morgan Stanley's global strategy. Our focus now is to further expand our domestic market platform and capabilities," said James P. Gorman, president and chief executive officer of Morgan Stanley, in a statement.

Morgan Stanley, which was the second-largest shareholder, helped to launch CICC in 1995, along with China Construction Bank and other domestic and international financial institutions.

With their thinking no longer dominated only by market potential, foreign investment banks have become more rational in their approach to cross-border joint venture institutions in China, according to an anonymous source from the China Securities Regulatory Commission (CSRC) quoted by Caijing magazine.

Related readings:  GIC, OCBC join group buying Morgan Stanley's CICC stake  CICC share change approved  China's CICC gets nod for major shareholding change  Jianyin to transfer CICC stake to Central Huijin

In the joint investment banking business, Chinese shareholders desire advanced management techniques, while foreign players covet market share in China, the magazine said.

However, domestic and overseas shareholders should have the same development targets when they develop long-term cooperation strategies for joint venture investment banks, said Li Yi, chairman of the Beijing-based UBS Securities Co Ltd, who mwas also quoted by Caijing.

The slow growth of joint venture investment banking business doesn't mean that foreign players have lowered their expectations in the country. On the contrary, another wave of joint ventures is emerging, Li told Caijing.

China Fortune Securities announced in late November that it will inject 680 million yuan ($102.13 million), two-thirds of the whole stake, in the launch of a joint venture investment bank with Morgan Stanley.

First Capital Securities Co Ltd, a Guangdong-based financial institution, received approval last month from the CSRC to launch a joint venture securities company with JP Morgan.

Meanwhile, Guolian Securities Co Ltd and the Royal Bank of Scotland will also jointly establish an investment bank.

The upsurge may have been sparked by the news that the Shanghai Stock Exchange is set to launch an international board next year, said Wang Dali, an analyst from Southwest Securities.