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JPMorgan to form China tie-up with First Capital

(Agencies)
Updated: 2010-03-12 11:28

JPMorgan Chase & Co will set up a securities joint venture in China with First Capital Securities Co, two people with knowledge of the matter said.

New York-based JPMorgan signed a memorandum of understanding with the Shenzhen-based securities firm this week, the people said, declining to be identified because they aren't authorized to discuss the deal in public.

JPMorgan, aiming to plug gaps in its China business, follows Goldman Sachs Group Inc, UBS AG and others investment banks now operating joint ventures in the country. A tie-up with a local partner is a prerequisite for arranging share sales in the world's biggest market for initial public offerings (IPOs) in 2009.

Companies raised 209 billion yuan ($31 billion) in IPOs in Shanghai and Shenzhen last year, making China the world's biggest market for first-time stock sales, even after the securities regulator blocked sales in the first half of 2009.

Gaby Abdelnour, JPMorgan's Asia-Pacific chief executive officer, said in a March 2 interview that the US bank aimed to get a venture partner this year after having wasted four years in dead-end talks with Bohai Securities Co and Liaoning Securities Co

The New York-based company, which has asset management and futures and options ventures and operates a locally incorporated bank in China, will face a five-year wait to qualify for a brokerage license under rules set out by the China Securities Regulatory Commission. It will also initially be limited to a 33 percent stake in the investment bank venture.

Above average

First Capital is ranked 33rd among underwriters in China last year after it arranged 6.76 billion yuan in stock and bond sales, according to the Securities Association of China. The ranking made the firm eligible to form a partnership with a foreign bank, under the nation's securities laws.

The Chinese company, 15.72 percent owned by Beijing's Capital Group, has underwriting and proprietary trading licenses and can provide investment advisory, project financing and trust management services. It has seven sales outlets in the country including Shenzhen, Shanghai, Beijing and Foshan, according to its Web site.

Officials at the Chinese securities firm weren't immediately available to comment. A Hong Kong-based spokesman at JPMorgan declined to comment.

Abdelnour, 56, said he wants China to contribute about a quarter of JPMorgan's Asia revenue "over time" from around 10 percent to 15 percent. The US bank may also buy a stake in a Chinese bank as its next step, when China relaxes limits on ownership, he said in the interview last week.