Hong Kong-based Bank of China International (BOCI), the investment banking arm of BOC, on Monday said it would officially launch its brokerage joint venture later this week.
The company, BOCI (China) Ltd, is the second Sino-foreign joint brokerage but the first allowed to trade and underwrite A shares, heralding the opening of China's massive stock markets to overseas investors.
The brokerage, in which BOCI takes a 49 percent stake, will hold an opening ceremony in Shanghai on Friday, company spokeswoman Wang Qiaoru told China Daily.
"We will use more than 20 years of experience and technology accumulated by the BOCI on international capital markets to serve the development of China's capital markets," the firm said in a statement.
But it is unlikely BOCI (China) will start trading A shares on the secondary market before wrapping up the ongoing acquisition talks with Hainan-based brokerage firm, Hong Kong-Macau Securities, Wang said.
The existing platform and a national network of Hong Kong-Macau Securities would help BOCI (China) to build its own, she said.
As to the underwriting business, Wang said BOCI (China) will start it when the market condition turns desirable this year.
"Whenever we enter the market, we will not let investors down," she said.
BOCI (China) is already in underwriting talks with several A-share would-bes, company spokeswoman Yan Chunmei told China Daily in Beijing.
The joint venture will have a registered capital of 1.5 billion yuan (US$181.2 million). Beside BOCI, State oil giant China Petroleum National Corp holds 21 percent, the State Development Investment Corp 12 percent, Chinese tobacco conglomerate Hongta Group and two other domestic shareholders each owning 6 percent.
At present, the company has about 80 employees in Beijing and Shanghai, Yan said.
First step
Analysts said the emergence of the first A-share brokerage joint venture was a significant move in China's securities reform following the country's entry to the World Trade Organization (WTO).
"It is the first step of China to open up the A-share market," said Charles Cheung, head of China research of Salomon Smith Barney.
"The step will be followed by another step and other foreign banks could be allowed to do so in one or two years," Cheung said.
But Cheung said foreign investment banks still have reservations about entering the A-share market despite it being the second largest in Asia behind Tokyo.
For foreign investors, the risk is too high while the quality of shares is low on the A-share market, he said.
China has promised to allow overseas companies to set up joint investment banks after its entry to the WTO, but such ventures allow only a 33 percent foreign presence and can only underwrite, not trade, A shares.
Analysts said BOCI (China) was an exception because its ultimate parent is the state-owned BOC.
China's first Sino-foreign investment bank was China International Capital Corp (CICC), 35 percent owned by Morgan Stanley and 35 percent held by the China Construction Bank. CICC can only underwrite A shares.
(China Daily March 26, 2002)
