Back to top

Analyst Blog

The Bank of New York Mellon Corporation (BK - Analyst Report) is selling its 49% stake in China fund-management joint venture (JV) to Shanghai Leadbank Asset Management Co, according to a recent report in The Wall Street Journal. The sale of the unit – BNY Mellon Western Fund Management Co. – reflects BNY Mellon’s efforts to restructure its Chinese business to suit the changing regulatory and market conditions. The value of the deal, which is pending a regulatory nod, remains undisclosed.

The JV was established nearly four years ago. China’s Shaanxi Province-based Western Securities Co. owns the remaining 51% stake in the JV. The unit has been reporting losses in recent quarters.

What Incited the Sale?

In order to enter the lucrative Chinese market, many foreign fund houses had set up joint ventures with Chinese partners. BNY Mellon was among those. With the recent changes in the regulations of asset management business in China and opening up of the industry, BNY Mellon has decided to make a fresh start of its management business in the mainland. The latest deal is only a step toward that goal.

Further, the JV has been reporting losses in recent quarters. This might have prompted BNY Mellon to offload its stake.

What China Offers Now?

Last year, China Securities Regulatory Commission loosened its stringently controlled mutual-fund industry, allowing securities firms, insurance companies and private funds to enter the market for the first time. Before that, only licensed fund-management firms were allowed to conduct such business.

In this new business environment, foreign companies are re-strategizing their asset management business in China. Many are contemplating setting up wholly owned enterprises in China, instead of joint ventures, as the former would allow more room for implementation of strategies.

We expect BNY Mellon to be able to grab this lucrative opportunity with its balance sheet strength.

BNY Mellon currently carries a Zacks Rank #3 (Hold). Some better-ranked bank stocks include Central Pacific Financial Corp. (CPF - Snapshot Report), S&T Bancorp Inc. (STBA - Snapshot Report) and Univest Corporation of Pennsylvania (UVSP). All these stocks sport a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
FELCOR LODG… FCH 10.50 +3.75%
COVENANT TR… CVTI 12.50 +3.22%
OLD DOMINIO… ODFL 63.52 +1.24%
VASCO DATA… VDSI 13.63 +1.11%
FIRSTSERVIC… FSRV 56.19 +0.83%