Morgan Stanley MS is set to become the largest shareholder in its China mutual funds joint venture (JV) — Morgan Stanley Huaxin Fund Management Co — after winning an auction held on Mar 30 This was reported by Reuters.
Morgan Stanley will buy an additional 5.5% stake in the JV for $3.73 million. Notably, the purchase is still subject to approval from the China Securities Regulatory Commission (CSRC).
Morgan Stanley will acquiring the stake from a private shareholder in a court-appointed auction. Following this, the company’s stake will exceed Huaxin Securities’ 39.56% interest. Presently, Morgan Stanley owns 37.4% stake in the fund.
This move comes as China is easing restrictions in its financial markets, allowing greater foreign participation. Indicating its readiness to allow greater access to global banks into the country’s financial markets, the Chinese securities regulator now allows foreign companies to increase their stake to 51% in securities JVs, up from the existing ceiling of 49%.
Notably, in 2017, Morgan Stanley had raised its stake in a securities joint venture with Huaxin to 49% and expressed an interest in increasing it further. Recently, JPMorgan JPM and Nomura Holdings Inc. NMR received regulatory nod for setting up brokerage joint ventures in China. Last December, UBS Group AG UBS became the first foreign bank to receive the regulator’s consent, since the rules on foreign investment in brokerages were announced in 2017.
Global investment banks’ expansion has been limited in China for the past few years due to restrictions imposed on ownerships.
With the easing of regulations for global banks and a growing Chinese economy, major foreign banks will likely expand their presence in the region.
Over the last six months, shares of Morgan Stanley have increased 3.2% compared with the 5.8% decline registered by the industry.
Currently, Morgan Stanley carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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