JPMorgan applies to take full control of China securities venture

JPMorgan has applied to take full control of its securities joint venture in China, in the latest example of a US bank expanding its foothold in the country’s financial markets.

The bank said on Thursday that it had handed in an application to Chinese regulators to purchase 100 per cent of the business, up from its current 71 per cent.

The move comes after a period in which some of Wall Street’s biggest names have sought to increase their presence across China’s rapidly liberalising financial markets, despite worsening geopolitical tensions between Beijing and Washington.

Foreign financial groups have historically expanded into China through partnerships in areas such as securities, futures and asset management. Due to recent government reforms, they can now apply for full ownership of such businesses.

Since last year, JPMorgan has been in the process of buying out its joint venture partner in its China asset management business. In 2020 it also became the first foreign bank to gain full ownership of a futures business in the country.

JPMorgan is the second foreign bank to apply for full ownership of a securities joint venture, following Goldman Sachs in December. Its Wall Street rival is buying out its partner in a business that dates back to 2004.

“Our target is to get it done as soon as possible,” said Mark Leung, China chief executive for JPMorgan, told Bloomberg television. “The reality is this is a huge market, with even bigger potential, so no one can afford to miss it.”

Securities businesses are involved in initial public offerings and the underwriting of stock and bond issuances. In China the sector includes vast brokerages such as Citic Securities and Haitong Securities.

“The domestic IPO business is largely dominated by the domestic brokers,” said Hao Hong, head of research and chief strategist at Bocom International. “The Chinese market, the trading volume, the IPO volume is so huge that I think it’s attractive enough for anyone to want to operate in China.”

In May, it emerged that Morgan Stanley was expanding its stakes in both its securities and mutual fund joint ventures, according to Shanghai stock exchange filings.

Foreign players are also building new partnerships with Chinese institutions in wealth management, which is distributed through the country’s banking system and has recently been subject to reforms that encourage foreign participation.

Last week, Goldman said it received initial approvals for a majority-owned wealth management partnership with ICBC, which would allow it to design investment products for the Chinese bank’s customers.

US investment group BlackRock has approvals for a similar arrangement with China Construction Bank, while Europe’s Amundi and Schroders have also announced partnerships.

Additional reporting by Wang Xueqiao in Shanghai