FiNETIK – Asia and Latin America – Market News Network

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Citi and Orient Securities Sign China Securities JV Agreement

Citigroup and Orient Securities Company Ltd signed definitive agreements June 2, subject to regulatory approval, establishing a securities joint venture to operate in the Chinese domestic market. The new JV will be called 东方花旗证券有限公司 in Chinese and “Citi Orient Securities Co. Ltd” in English.

The joint venture will engage in investment banking business in the Chinese domestic market, including equity and debt underwriting and advisory services. Orient Securities Company Ltd will have a 67 per cent stake in the new entity with the remaining 33 per cent owned by Citigroup, consistent with existing Chinese regulations.

In addition to the investment banking JV, Orient Securities and Citi will also explore further cooperation in other areas such as research and training.

“The pairing of Citi’s global capabilities and Orient’s local strengths will create a market leading securities company with the ability to serve Chinese and international companies to help them raise capital from local equity and debt markets. This new partnership underscores our strategic commitment to China’s capital markets and complements our well-established banking franchise in China,” said Stephen Bird, CEO for Citi in Asia Pacific.

“We are delighted to be forming this important partnership with Orient Securities, a strong, highly reputable local firm which shares Citi’s management philosophy on building for success.

This announcement underlines our continued investment in China to support our clients,” said Andrew Au, CEO for Citi China.

Source: Asia E-Trading, 02.06.2011

 

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Filed under: China, News, , , , , , ,

BM&FBovespa and Chile’s bolsa sign “joint operating agreement”

Brazil and Chile’s main exchanges, BM&FBovespa and Bolsa de Comercio de Santiago (BCS), signed a “joint operating agreement” on Monday allowing order routing between the two and which envisions Brazilian assistance in the development of derivatives markets in Chile.  Read FT full article here.

The development is another sign that exchanges in Latin America are gearing up for intra-regional competition for trading coming from abroad as regulatory technology barriers to easier access to the region are falling away.

Some exchanges are also forming alliances with neighbours to develop smaller markets to the levels of regional big-hitters Brazil and Mexico.

Brokers connected to BM&FBovespa, Latin America’s largest exchange, can send orders to Chile’s Bolsa de Comercio de Santiago (BCS), and vice versa in an arrangement that is also being used by BM&FBovespa and the Mexican bolsa with CME Group of the US.

The Brazil-Chile arrangement will initially be limited to stocks traded on both exchanges, as well as stock options and other related derivatives.

Carlos Kawall, director of international affairs at BM&FBovespa, told FT Trading Room by phone from Santiago. “We are undertaking an international expansion, in Asia but most importantly in our region, because we think that Latin America as an integrated unit has a lot of potential to be explored yet.”

The BCS last month joined an “Andean” alliance with smaller exchanges in Colombia and Peru, which gives traders in each country access to partner markets. Next year they plan to allow for direct access to markets and the standardisation of regulation.

Brazil will seek alliances with Colombia and Peru similar to that signed with Chile, Mr Kawall said.

In the first year, the focus of the agreement with Chile will be to “improve connectivity electronically from the country”, he says, but with the later possibility of assisting Chile develop its derivatives markets, encompassing options and futures on stocks, interest rates, and exchange rates.

BM&FBovespa is the third-largest exchange in the world by market capitalisation of the group itself and houses the world’s sixth-largest derivatives market by number of contracts. At the moment, most of Chile’s derivatives trading is done over the counter, rather than centrally cleared and with a counter party, as in Brazil.

By partnering up with Brazil, Chile’s exchange will also have access to the BM&FBovespa/CME trading platform for its markets. BM&FBovespa holds a 5 per cent stake in CME Group. Edemir Pinto, chief executive of the Brazilian group, was recently named to the board of directors of the Chicago-based group.

BM&FBovespa and BCS have also agreed to receive and distribute each other’s market data, and establishment joint initiatives related to settlement and clearing.

Source: FT Financial Times, 13.12.2010 By Vincent Bevins

Filed under: BM&FBOVESPA, Brazil, Chile, Colombia, Events, Exchanges, Latin America, Market Data, Mexico, Peru, , , , , , , , , , , , , , ,

Alternative Latin Investor Issue 6 September/October

Alternative Latin Investor Issue 6 September/October 2010 click here for a free issue

Issue 6 Content Index

  • Infrastructure Municipal Bonds in Latin America
  • Emerging Markets Let the World See Your Wares in the Right Light
  • Investment Flows and Stock Market Returns p
  • Agribusiness Beekeeping in Latin America
  • Art Pinta: The Contemporary and Modern Latin American Art Show
  • Commodities The BP Oil Spill
  • Sowing Pools: Alternative Financing
  • Funds Latin America’s Favorite Sport: For Sale
  • Philanthropy Ashoka: Inspiring and Supporting Tomorrow’s Leaders
  • Regulation Due Diligence: You Bought the Company, Now What?
  • Renewable Energy Opportunities in Argentine Biodiesel
  • Ventures Real Estate Colombia: Founder Chad Smalley
  • Economist Emerging Market Forecaster
  • Wine Stocking up for World Cup 2014
  • Hedge Funds The Spectrum of Investors for Latin American Hedge Funds by Merlin Securities

Source: Alternative Latin Investor 22.09.2010

Filed under: Argentina, Banking, Brazil, Chile, Colombia, Latin America, Mexico, News, Services, Wealth Management, , , , , , , , , , , , , , , , , , , , , , , ,

Japan:TSE and TOCOM to set up Carbon Trading Joint Venture

Tokyo Stock Exchange Group, Inc. (TSE Group) and Tokyo Commodity Exchange, Inc. (Tocom) reached an agreement to establish a joint venture in the future.

The objective of the new company will be to set up an emissions trading exchange, in order to contribute to the reduction of greenhouse gases and facilitate emissions trading. Both parties had already signed a Memorandum of Understanding (MOU) on comprehensive mutual cooperation in January 2008.

In a bid to stop global warming, worldwide efforts are being made to reduce greenhouse gases. In Japan, achieving numerical targets agreed in the Kyoto Protocol and drafting post-Kyoto mid-term targets have become an important policy issue. In addition, the “experimental introduction of an integrated domestic market for emissions trading” began last autumn.

In light of this situation, while an expansion of emissions trading is foreseen in the future, the recent financial crisis has led to the re-acknowledgement of the importance of the features of an exchange such as high levels of liquidity and transparency as well as stable and reliable settlement.

Under such circumstances, the TSE Group and TOCOM concur that it is necessary to take concrete steps toward the establishment of an emissions trading exchange. The two parties have vast experience and expertise on forming effective markets and large participant bases in the course of operating their respective securities and commodities exchanges over the years. They agree that it is their social responsibility to jointly apply such knowledge and experience to the establishment of an emissions trading exchange.

In addition, both parties will work together to consider the design and rules for the emissions trading exchange. Last year, the Tokyo Stock Exchange (TSE), a market operator wholly-owned by the TSE Group, set up the “TSE Carbon Market Study Group” to examine practical issues required to establish a carbon market exchange with experts on emissions trading. The study group is scheduled to be re-launched soon as a study group jointly operated by both TSE and TOCOM. It will be a venue for discussions and examinations in more detail.

The joint venture company is also expected to gather opinions from concerned parties for carrying out studies in a wide ranging field related to emissions trading.

Source: Tokyo Stock Exchange, 29.10.2009

Filed under: Asia, Energy & Environment, Exchanges, Japan, News, , , , , , , , , ,

More Tweaking and Consolidations for China’s Brokerage Firms

A fourth round of securities industry reform is forcing some of the nation’s 107 brokers to merge while locking out foreign investors.

A red banner draped above a Nanjing building doorway at 90 Shandong Road enthusiastically declared, “Battle for Entry into Industry First Tier.”

The banner was celebrating regulatory approval in August for a joint venture – 18 months in the making — between Huatai Alliance Securities and the former Shenzhen Alliance Securities.

The message also mirrored an upbeat mood for selected players in the nation’s brokerage business. They plan to benefit from a new wave of consolidation that’s sweeping the industry following recent government enactment of two policies: the Intra-Industry Competition Ban, and the One Participant, One Controller rule.

Soon, industry analysts predict, dozens of the 107 securities firms now operating in China could disappear in one fell swoop, altering the industry landscape in the fourth consolidation wave since securities trading began in China.

Local governments that control minor brokers may be negatively affected by the changes, which are aimed at strengthening the industry overall. But domestic players that survive the shakeup are likely to remain shielded from foreign competition for some time.

Individual firms are mapping out survival strategies.

Second-tier firms such as Huatai, Guoxin Securities and GF Securities are now being encouraged by regulators to seize the opportunity, strengthen integration efforts and expand their territories.

The China Securities Regulatory Commission (CSRC) gave a green light to Huatai’s proposal to reach beyond its traditional, local business in Jiangsu and Zhejiang provinces and battle for a position as a top-tier brokerage.

Some firms may lose out over the policy changes. Large brokerages controlled by CITIC Securities and the so-called Huijin Family, for example, are being limited in this latest round of restructuring by the One Participant, One Controller rule.

But the ultimate goal, as the office building banner in Nanjing suggested, is a rapid ascent for every firm that emerges from the consolidation push.

Step by Step

The integration wave reflects the kinds of industry pressure and regulatory urging that were seen before. Brokerage firm crises gave birth to the first round of consolidation, spurred by the government, in the 1990s. That led to mergers between firms, such as Shenyin and Wanguo combining to become Shenyin Wanguo. Similarly, Guotai and Junan merged.

After 2000, as capital poured in and share trading expanded, nationwide powerhouses such as CITIC Securities appeared on the scene. That development was followed by a three-year, comprehensive overhaul of the brokerage industry starting in 2004, which triggered consolidation battles affecting 48 firms that had been on the brink.

A wave of mergers and acquisitions among small- and medium-sized brokerage houses altered the industry last year, setting the stage for the latest round of reform. Annual reports for 2008 show the top 30 firms currently control 91 percent of the domestic market, while the 10 largest firms have a 64 percent share.

By the time the dust settles from the latest consolidation, market insiders say, only around 70 or 80 firms will remain.

Regulatory Persuasion

Experts say regulators promoted the latest integration by enacting the new rules despite resistance from the opponents of consolidation, including local governments.

“This integration tide is both a requirement from regulators and a result of the need to expand to survive,” a Shanghai brokerage executive explained. “One could say that the involvement of regulators has sped up the pace of integration.

“For securities firms that have been around for nearly 20 years and have experienced several restructurings, mergers and acquisitions, internal governance practices have reached a critical point where integration is necessary.”

Central government regulators hope to chip away at a system that has protected brokers with tight links to local government fund-raising.

The brokerage executive said local governments hold controlling stakes in most small and medium-sized domestic brokerages, and none want to lose these financial platforms. Governments want to use these brokerages to push forward reforms of state-owned enterprises and encourage companies to go public.

No wonder local governments have resisted broker restructuring, adding obstacles to possible mergers and acquisitions that would cross geopolitical boundaries.

The two new regulations “mean that the pace of integration in the brokerage industry is likely to accelerate, despite problems such as distribution of benefits (and) regional protectionism,” said Wang Dali, an analyst at Southwest Securities.

“A brokerage with annual profits of 200 to 300 million yuan is a very good business in the eyes of local governments,” the brokerage executive said. “But in the brokerage industry, it makes for an awful company and an obvious target for M&A.”

Integration Moves

The latest consolidation wave may not be the last for China’s brokerage industry. Experts say reform’s climax would require a break-up of the Huijin Family and allowing foreign brokers into the market – developments that may be far in the future.

Nevertheless, the One Participant, One Controller rule presents a substantial barrier to the Huijin Family. The policy says two or more securities firms controlled by a single company or individual, or firms with controlling interests in each other, cannot conduct overlapping brokerage business.

During the 2004 overhaul, Central Huijin Co. — then controlled by the central bank — and its wholly owned subsidiary China Construction Bank Investments Co. (CCB Investments) were entrusted with disposing risk in the brokerage industry. That led to Huijin and CCB Investments taking partial or controlling interests in nine brokerage firms, giving them the nation’s largest market share and enormous power in the industry, building what insiders called the Huijin Family.

Huijin has been gradually taking over some CCB Investments brokers since last year, allowing CCB Investments to reach the One Participant, One Controller standard. But Huijin itself owns stakes in seven brokerage firms — far exceeding the limit.

Huijin is trying to accelerate the transfer of its broker shares to UBS Securities, Guotai Junan and Qilu Securities, yet it is still majority shareholder in Galaxy Securities, Central Investment Securities, Shenyin Wanguo and CITIC Construction Investment Securities.

If One Participant, One Controller were strictly enforced, these large brokers would not only be restricted from going public, but internal integration could be impeded as well.

“In the current market environment, in what form, at what price and how to exit are sensitive and difficult-to-answer questions for Huijin, regulators and Huijin’s brokerages,” a Huijin executive said.

There were once rumors that CSRC was inclined to let Anxin Securities take over Huijin’s brokerage stake. But price was apparently a sticking point. Anxin is owned by the China Securities Investor Protection Fund, which is managed by CSRC.

“What needs to be clear is that Huijin at the time (of the last consolidation) saved the securities industry by taking over those (troubled) brokerages,” a source close to Huijin said. “Now, those assets have seen huge increases in value. Should Huijin not keep those profits? “Price is the key issue,” the source said.

One brokerage on track for growth through a merger is Guoxin, which ranked third in equity funds transactions and first in investment banking share issuances last year. Last year, Guoxin posted net profits of 2 billion yuan and 45.2 billion yuan in assets, ranking it seventh in the industry.

Although the company has only 49 offices, it boasts registered capital of 7 billion yuan and was one of only two firms to win AA ratings for two consecutive years.

In August, a Guoxin official said the company would acquire Hualin Securities. Previous market rumors pointed to a possible tie-up between Guoxin and Dongguan Securities.

Cool to Foreigners

Meanwhile, the current climate of consolidation parallels chilly attitudes toward foreign investment. Regulators are clearly cautious about issuing brokerage and advisory licenses to foreign enterprises.

China allows foreign financial companies to offer only investment banking. The only exception is China Euro Securities, a joint broker with foreign backing, which has a brokerage business permit to operate in the Yangtze River Delta region and an investment advisory business permit from CSRC.

“CSRC’s goal is to allow domestic brokerages to grow and develop sufficiently before allowing foreign investment,” one brokerage executive explained. “One Participant, One Controller directly encourages securities companies to develop as a community, supporting the superior and eliminating the inferior, and pushing medium-sized brokerages to grow bigger and stronger.”

In early August, sources close to the U.S. financial giant Goldman Sachs said the company expected to receive a license for securities industry asset management. But CSRC information has continued pointing toward difficulties for foreign securities firms in receiving anything but investment banking licenses in the near-term.

Under a State Council directive to speed up Shanghai’s development as a financial center, the city’s joint venture securities and fund companies have been told to take the lead in opening the door wider. It was suggested this could expand the scale of brokerage licenses issued to foreign institutions. Asset management and self-service businesses were expected to gradually open to foreign investment as well.

But the domestic industry may not be ready for foreign players. A CSRC spokesperson said, “If we throw open the door, two-thirds of China’s 107 brokerages would be out of business. The current financial crisis further proves that a policy of steadily opening up is correct.”

Source: Caijing.com, 04.09.2009 by Fan Junli

Filed under: Asia, China, News, Services, , , , , , , , , , , , , , , ,

HSBC in China JV talks with Industrial Securities

HONG KONG -(Dow Jones)- HSBC Holdings PLC (HBC) is in advanced talks to set up an investment banking joint venture in China with Industrial Securities Co., a person familiar with the situation said Wednesday.

The UK-listed HSBC, which already has a wide-reaching presence in China, is seeking to join the handful of foreign firms with a presence in the mainland’s lucrative underwriting and advisory markets.

The person familiar with the situation said it is difficult to say when HSBC and Industrial Securities will agree on a deal, and declined to elaborate.

Industrial Securities is a Fujian-based brokerage with a registered capital of CNY1.93 billion, according to its website. It provides a full-range of services in China, including broking, advisory, and new listing underwriting.

The Apple Daily reported Wednesday, citing unnamed sources, that the two sides may strike a deal by the end of this year to set up the venture, subject to agreeing on the terms and regulatory approval.

HSBC wants management rights over the entity, a model that UBS AG (UBS) and Goldman Sachs Group Inc. (GS) used when setting up their Sino-foreign brokerage joint ventures, according to the report in the Chinese-language newspaper. China has capped the maximum stake foreign banks can have in a Chinese brokerage venture at 33%, though a few of the tie-ups have accorded management control to the foreign firm.

If its venture is approved, HSBC would be joining a list of just a handful of foreign brokers that have set up shop in the mainland through joint ventures in recent years.

In December, the Chinese government ended an almost two-year moratorium on approving new joint ventures, as it shielded its domestic brokerages from foreign competition. Since then, China has approved ventures by Credit Suisse Group and Deutsche Bank AG (DB), though those tie-ups are only allowed to underwrite and sponsor deals domestic securities and debt deals, and not the trading of Chinese-listed shares.

But the list of foreign firms seeking entry is long, especially with China’s stock market being one of the world’s best performers this year. Many Shanghai-listings also registered gains of more than 90% on their first-day of trade.

Australia’s Macquarie Group Ltd. (MQG.AU) has signed a memorandum of understanding with Inner Mongolia-based Hengtai Securities Co. on setting up an investment banking joint venture, while South Korea’s Samsung Securities Co. (016360.SE) said earlier it was finalizing which domestic partner it is going to team up with.

Citigroup Inc. (C) and Morgan Stanley (MS) are also awaiting regulatory approval for their China joint ventures. Morgan Stanley has a stake in China International Capital Corp, but it is a passive financial investor.

“I’m not surprised to hear of more joint-venture acquisitions by HSBC in local financial institutions rather than in banks,” said Dominic Chan, an analyst at BNP Paribas.

“I think HSBC has been focusing on mainland China and Asia, and this deal is part of its ongoing program to divert effort and capital from Europe and America back to Asia,” he said.

A brokerage in China would add another crucial leg to the bank’s already dominant presence in the country. In China, HSBC has an 18.6% stake in Bank of Communications Co., the nation’s fifth-largest lender by assets; a 16.7% holding in Ping An Insurance (Group) Co. of China Ltd.; 8% ownership of Bank of Shanghai Co., and a 49% stake in HSBC Jintrust Co, a Shanghai-based fund company. HSBC’s 50-50 life insurance joint venture with Beijing-based financial services provider National Trust Ltd. was approved by regulators recently and is set to be up and running in the third quarter.

The lender has also hired investment bankers to advise it on listing on the Shanghai bourse next year, in potentially the country’s first listing by a foreign company. Although based in the U.K., HSBC made a quarter or around US$2.98 billion of its first-half pre-tax earnings from China.

Source: Dow-Jones, 19.08.2009

Filed under: Asia, Banking, China, News, Services, , , , , , , , , , , , , , , ,

Value Partners and Ping An form ETF joint venture

The partnership involves Ping An buying a 50% stake in Value Partners’ Sensible Asset Management Hong Kong.

Value Partners Group and Ping An Insurance have formed a joint-venture to launch exchange-traded funds (ETF) in Hong Kong. The deal involves Ping An acquiring a 50% stake in one of Value Partners Group’s subsidiaries, Sensible Asset Management Hong Kong (SAMHK), at around HK$23.25 million ($2.9 million).

This deal deepens the relationship of the fund house and insurance company as Ping An owns 9% of Value Partners Group. SAMHK was formed in 2008 to study the ETF market and business, with the view to developing and offering ETFs to retail and institutional investors.

SAMHK is planning to launch its first ETF “soon”, subject to the approval of Hong Kong’s Securities & Futures Commission (SFC) of the change in shareholding, final fund registration and authorisation as well as market conditions. Value Partners declined to provide specific details of the planned ETF launch, citing regulatory constraints.

SAMHK’s first ETF is expected to track the FTSE Value-Stocks China, which was designed by Value Partners using its proprietary value screening process and was launched in cooperation with FTSE last month. The index captures the performance of 25 quality value stocks among liquid and tradable Chinese companies listed on the Hong Kong Stock Exchange including H-shares, red-chips and P-chips.

That new China equity index adopts Value Partners’ value-based methodology and is calculated and maintained by FTSE as a custom index solution.

Value Partners Group has a reputation for being a pioneer in value investing, particularly in mainland Chinese companies. This year, however, the fund house is branching out and expanding its product offering to include ETFs and bond funds. The move is in line with Value Partners’ efforts to keep up with the demand of its clients, introduce innovative products, and reach its target assets under management (AUM) size of $10 billion. As of April, Value Partners had an AUM of $2.9 billion.

In a previous interview with AsianInvestor, Cheah Cheng Hye, Value Partners Group’s chairman and CIO, said Value Partners is planning to build a niche in the ETF market. The fund house now has the quantitative Asia Value Formula Fund, which has served to improve its learning curve when it comes to ETFs. The plan is to focus on enhanced ETFs that are aimed at trying to improve performance by combining index tracking with proprietary investment strategies.

Louis Cheung, executive director and group president of Ping An, says the insurance firm is keen on the collaboration with Value Partners because it sees the rapidly growing customer demand — which is also reflected in qualified domestic institutional investors (QDII) fund flows — for investment products that offer strong liquidity and a high degree of transparency at a low cost. These three qualities are among the selling points of ETFs.

SAMHK is one of five investment management businesses of Value Partners Group. Value Partners Limited, because of the flagship fund, contributes the most to the group’s bottom line. But Cheah says SAMHK may be a serious market player three years from now because the market is changing and this business is expected to cater to these changing market needs.

When asked in a previous interview how SAMHK will likely evolve, Cheah noted that Value Partners Group hopes to come up with more products that appeal to investors in mainland China. Don’t forget that 9% of this company is owned by one of China’s biggest insurance companies and this gives it the ability to co-brand product offerings.

“The dynamics of asset management is changing,” says Cheah. “The source of funding now is moving away from US and Europe to Asia-Pacific including Hong Kong, China and Singapore and so our fundraising and product offering and menu will all have to be adjusted to fit the changing consumer demand.”

Value Partners isn’t expected to hire new people for the joint venture. Value Partners Group works as a cohesive team of around 20 investment professionals and around 60 support staff, all of whom are involved in the group’s investment management businesses.

Source: AsianInvestor.net, 13.08.2009

Filed under: Asia, China, Hong Kong, News, Services, , , , , ,

Credit Suisse China JV with Founder Securities

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.

Source: Euromoney, 11.08.2009

Filed under: Asia, China, News, Services, , , , , , ,

Safe expected to revive QDII fund quotas

China Universal and E-Fund may be the last to launch active QDII strategies, as a host of passive and ETF products line up at Safe’s door.

The QDII scene in China has been at a standstill ever since Schroders’ China JV with the Bank of Communications launched its Bocom Schroders Global Selection Fund on August 22 last year. Three weeks later, Lehman Brothers collapsed, AIG was bailed out and Merrill Lynch was forced into a marriage with Bank of America.

Alarmed at the chaos, decision makers at the State Administration of Foreign Exchange (Safe) froze foreign-exchange quota approvals for fund managers, which had hoped to launch products under the qualified domestic institutional investor (QDII) programme.

There are now 20 fund houses in line for such approval. These are the fund houses that have received the blessing of the industry regulator, the China Securities Regulatory Commission, which is the penultimate step before winning Safe’s quota.

It is now 10 months since the last QDII fund was given a quota, and the rumour mill about which company will be allowed to return to the market first is at full tilt. The betting in Shanghai is that QDII funds will be approved by September, although some observers reckon the first won’t launch until November.

Atop the queue awaiting Safe’s approval are Guangzhou’s E-fund and Shanghai’s China Universal. The two houses have already assembled their in-house investment teams. (E-fund opened its Hong Kong office in January this year. It now operates in IFC.)

E-fund is known to have signed up State Street Global Advisors as its partner to launch an Asian enhanced strategy product, while China Universal is backed by Capital International.

E-fund and China Universal are seen to be the last few players to pursue active global strategies, marking a transition phase from the first generation of QDII. A second generation of QDII is now brewing, as regulators and fund houses exhibit a strong preference for passive, indexed strategies for qualities such as transparency and liquidity.

Other firms also on Safe’s waiting list include: Changsheng, China Merchants Fund (JV of ING), Lord Abbett, UBS SDIC, Fullgoal (JV of Bank of Montreal), Da Cheng, Bosera, Guotai, Penghua (JV of Eurizon), Invesco Great Wall, AIG Huatai, Everbright Pramerica, Citic Prudential, Franklin Templeton Sealand, Guangfa, BoC International (JV of BlackRock), and ABN Amro Teda (now a JV of BNP Paribas).

Among these, Changsheng is said to have already mandated Goldman Sachs as an advisor. Calyon is also said to have snatched a mandate from BNP Paribas to execute Guotai’s QDII product, a passive offering indexed to Nasdaq 100. Meanwhile, the JVs will most likely develop products with their foreign shareholders.

Industry execs suggest Safe will be more comfortable giving out a new quota when the existing QDII funds recoup their losses and at least see their NAVs return to launch levels. After all, officials are still facing ongoing criticism for opening the floodgate for the first generation of QDII. (On top of which sits CIC’s losses in foreign investments, to which the Safe is responsible for funding.) The agency is desperately trying to time the next batch of QDIIs well in order to avoid similar embarrassment.

Only two out of nine existing QDII funds are in positive territory — Fortis Haitong China Overseas Best Selection Fund and Bocom Schroders Global Selection Fund. As at the end of June, the two were up by 50.09% and 33.80% respectively since launch. The seven other existing products delivered a -29.6% loss on average. These range from China International’s -49.6%, Harvest’s -41.4%, China Southern’s -36.2% to ChinaAMC’s – 30.9%, ICBC Credit Suisse’s -26.4%, Yinhua’s -17.8% and Fortune SGAM’s -5.0%.

Source: Asianinvestor.net, 14.07.2009

Filed under: Asia, China, News, Services, , , , , ,

Deutsche Bank securities JV with Shanxi Securities gets China approval

The license allows Zhong De Securities to underwrite A-shares and domestic Chinese bond issues.

Deutsche Bank announced yesterday that its joint securities venture with Shanxi Securities has received a business license from the Chinese regulators, meaning it is now free to launch investment banking services targeted at the domestic Chinese market. The license was granted about six months to the day after the two firms got the approval to set up the JV and makes Deutsche the fifth international bank to gain access to China’s equity and bond markets after CLSA, Goldman Sachs, UBS and Credit Suisse.

In accordance with the prevailing Chinese regulations, Deutsche owns 33.3% of the Beijing-based JV — named Zhong De Securities — while Shanxi Securities owns the remaining 66.7%. The business license allows Zhong De to underwrite and sponsor Chinese A-share issues, as well as government and corporate bonds, but not to conduct brokerage operations. It is believed that the new firm will initially focus on large-scale equity issues, but in the longer term it is likely that Zhong De will want to take advantage of Deutsche’s expertise in the international bond markets and get more involved in China’s rapidly growing corporate bond market as well.

Stock broking is one of the most profitable areas of the securities business in China, but new regulations issued in December 2007 stipulate that Sino-foreign securities JVs will have to wait five years after their establishment to obtain an A-share brokerage license.

Deutsche Bank’s head of China corporate finance, Charles Wang, has been appointed CEO of the JV, while Shanxi Securities’ president, Wei Hou, will become chairman. Wang is an experienced investment banker who has been with Deutsche bank for three years. Before that he spent 12 years with Merrill Lynch. During his career he has focused primarily on equity and advisory, which reinforces the suggestion that Zhong De’s initial focus will be on A-shares.

Deutsche will nominate three members to Zhong De’s nine-person board of directors, including Wang and one independent director. Shanxi Securities will nominate the other six, which will include the chairman and two independent directors.

While current Chinese regulations caps the investment by foreign banks in a Sino-foreign securities JV at 33% and direct stakes in a securities firm at 20%, the international banks are all striving to get as much management influence as possible. While abiding by the ownership rules, Goldman Sachs and UBS both have effective operational control over their China businesses. However, both these firms received a special dispensation because they got involved in securities firms that were distressed and it is widely believed that Beijing will not allow more similar set-ups under the existing regulations.

Deutsche Bank didn’t comment on the level of management influence it expects to have, but a source said that as CEO Wang will be responsible for appointing most of Zhong De’s senior managers. Meanwhile, Shanxi Securities will appoint the chairman of the supervisory board.

“Zhong De Securities combines unique strengths from both of its shareholders,” Wang said in a written statement. “We have the personnel, experience, infrastructure and ambition to become a leading firm within China’s domestic financial services market.”

Zhong De gets the go-ahead just as China is re-opening its A-share IPO market, which was suspended in September in light of the financial market turmoil, which saw both Chinese and international equity markets tumble. In late June, Guilin Sanjin Pharmaceutical became the first company to receive approval for an initial public offering after the sharp rise in Chinese share prices this year had indicated that the market would be able to absorb new issues. However, the regulators have been allowing smaller companies to go public first, no doubt to test the waters. Guilin Sanjin, a manufacturer of traditional Chinese medicine, sold Rmb910.8 million ($133 million) worth of shares, or 44% more than it initially planned, after the offering ended up heavily oversubscribed. The deal was arranged by China Merchants Securities.

According to media reports, another three companies have also received approval for A-share IPOs so far, including Hong Kong-listed Sichuan Expressway.

Deutsche Bank is the second international bank to get approval for a Sino-foreign securities JV since a moratorium on such JVs was lifted in May 2007 and since the new regulations were announced in December 2007. A JV between Credit Suisse and Founder Securities received its final business license in January this year and has been underwriting a few corporate bond issues since then.

Goldman Sachs and UBS were both allowed to set up businesses in China before the new rules took effect, in 2006 and 2007 respectively, but chose different routes to do so — Goldman through a joint venture with Gao Hua Securities and UBS through its direct 20% stake in Beijing Securities.

Meanwhile, CLSA has a JV with Hunan-based Fortune Securities under the name of China Euro Securities (CESL), which was set up in 2003 under regulations that were introduced as a result of China’s entry into the World Trade Organisation in 2002. Pursuant to the five-year rule, CESL was granted a brokerage license for the Yangtze River Delta area in June last year in addition to its underwriting license and the firm is now focusing primarily on the brokerage business.

The only other international investment bank to have direct exposure to China’s domestic market is Morgan Stanley, which set up the very first JV (China International Capital Corp) together with China Construction Bank in 1995. This “pilot” programme turned out to be a one-off at the time though and no further approvals were granted until after China’s WTO entry. Today, Morgan Stanley has no management input into the JV, but receives revenues in proportion to its 33% stake.

Morgan Stanley signed a memorandum of understanding with Huaxin Securities in early 2008 to establish a JV where it would be more actively involved, but this is still awaiting regulatory approval. Another firm waiting for approvals is Citi, which signed a MoU for a securities JV with Zhongyuan Securities around the same time in early 2008.

For Deutsche Bank, this license means that it is now able to offer all of its core global businesses in China as well. The German bank has made significant investments in China over the past 18 months and currently has a 30% stake in Harvest Asset Management and a 13.7% stake in Hua Xia Bank. It also has a derivatives license and is locally incorporated in Beijing, which means it can roll out a branch network should it decide to do so.

Shanxi Securities was founded in 1988 among the first group of securities firms to be set up in China. According to a statement in January, when the approval for the JV was received, it has more than 53 branches in Shanxi province and other major cities, including Beijing, Shanghai and Shenzhen. At that time, it had 800 employees.

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Source: FinanceAsia.com, 08.07.2009 By Anette Jönsson

Filed under: Asia, Banking, China, News, Services, Wealth Management, , , , , , , , ,

Venezuela announces joint oil venture with Vietnam

President Hugo Chavez’s government says it is forming a joint oil company with Vietnam to exploit Venezuela’s heavy crude.

State-run Petroleos de Venezuela SA, or PDVSA, will cooperate with Vietnam’s state oil and gas monopoly, PetroVietnam, on oil exploration and production in Venezuela, according to a presidential decree in the Official Gazette issued Friday.  The company, to be called PetroMacareo SA, will operate in Venezuela’s eastern Orinoco River basin, and may also participate in transporting and selling oil, the decree said.  Under Venezuelan law, PDVSA’s partners may hold only a minority stake in oil production projects.

During a visit from Vietnamese President Nguyen Minh Triet in November, the two leaders discussed the possibility of building an oil refinery in Vietnam, and of cooperating with the Asian nation to build oil tankers. Chavez’s government has been forming joint oil ventures with allies ranging from Russia to China as Venezuela aims to diversify its oil clientele.

The United States remains the top buyer of oil from Venezuela, which is the fourth-largest oil supplier to the US.

Source: Forbes, 25.05.2009  click here for original article

Filed under: Energy & Environment, News, Venezuela, Vietnam, , , , , ,

China and Venezuela Launch Joint Oil Venture

BEIJING – State-owned PetroChina and Petroleos de Venezuela SA, or PDVSA, have formed a joint venture to pursue exploration and production projects in Venezuela, the official Xinhua news agency reported Wednesday.

China’s largest oil company will hold a 40 percent stake in the joint venture, PetroChina CEO Jiang Jiemin told company directors. PetroChina also approved the signing of a loan totaling 100 billion yuan ($14.7 billion) to fund foreign operations in 2009.

“The drop in oil prices on the international market represents a special opportunity for expanding horizons,” PetroChina said.

PetroChina and PDVSA plan to form two other joint ventures that will focus on transporting crude and developing two refineries, one of which will be in the southern province of Canton, Jiang said. The executive did not provide specific figures on the agreements reached with PDVSA.

PetroChina, the world’s second-largest oil company in terms of market capitalization, trailing only U.S. behemoth ExxonMobil Corporation, expects to produce 40 million tons of Venezuelan petroleum annually, Jiang said.

The joint venture created by PetroChina and PDVSA will allow the oil companies to work together and cut exploration and production costs.

Source: Xinhua 13.05.2009, LatinAmerica Harald Tribune 18.05.2009

Filed under: Asia, China, Energy & Environment, Latin America, News, Venezuela, , , , , , , , ,