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BlackRock Eyes Partnership With Tencent to Expand in China

Zacks Equity Research

As part of its efforts to expand operations in China, BlackRock, Inc. BLK has been looking for ways to develop a partnership with China’s internet giant — Tencent Holdings Ltd. Currently, the discussions, which have been going on between the two over the past year, are at an initial stage and no final decision has been made yet.

The move comes as the New York-based asset manager seeks to make its products for investment portfolios widely available in the growing mutual fund market in China.

BlackRock already manages assets of a lot of high-net-worth clients in China. However, as China further opens up its financial sector for foreign companies, the company wants to take advantage of this and hence expand in the region.

Notably, along with offering various wealth management products, Tencent owns the WeChat social media network and has rapidly growing financial operations.

Per people familiar with the matter, the preliminary discussions between the firms have primarily been focused on jointly developing a financial software system that is similar to BlackRock’s Aladdin business, which will enable clients in managing portfolio risk.

Another option that is being considered is to potentially offer BlackRock's portfolio tools via a Tencent platform.

While any sort of partnership between the companies will benefit both, there can be certain challenges that they might have to face because of the ongoing trade war between China and the United States.

Over the past few years, BlackRock has made several strategic acquisitions — domestic and overseas — which has aided top-line growth. Moreover, its strong global presence, broad product diversification, revenue mix and steadily improving assets under management are expected to further aid revenues.

Apart from BlackRock, various other finance companies are seeking to expand operations in China as the country announced plans to remove foreign ownership limits on financial firms by 2020, with the target of opening up the industry worth $44 trillion to international competition.

In fact, UBS Group AG UBS, JPMorgan JPM and Nomura Holdings Inc NMR have already received regulatory nod for acquiring majority stake in local joint ventures in China.

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