JPMorgan (JPM - Free Report) is set to increase stake in the China securities joint venture (JV). The U.S. banking giant has first right to buy a 20% stake in the JV from one of the local partners — Shanghai Waigaoqiao FTZ — for 177.7 million yuan ($26 million).
Other existing shareholders have given up their rights to add to their holdings. Also, they have agreed to not transfer and/or divest their holdings without consent from JPMorgan.
This potential stake purchase will take JPMorgan’s ownership in the JV to 71%. Thus, it will bring the company a step closer to gain full ownership of a securities firm in China. The JV comprises investment banking, research, equities and fixed income operations.
Last December, JPMorgan received the regulatory approval to set up a majority-owned securities JV in the country. At that time, the company’s CEO Jamie Dimon said, “We will continue to invest in and fully support our business in the country, which has become a critical market for many of our domestic and global clients.”
The current development comes on the heels of JPMorgan planning to pay a minimum of 7 billion yuan ($1 billion) for owning a 100% stake in its China mutual fund JV — China International Fund Management Co. Earlier in June, it received a nod to increase stake from 49% to 100% in the China-based futures JV - J.P.Morgan Futures Co.
With China opening up its financial markets to foreign firms faster than expected with the removal of restrictions on ownership, the company has decided to get full ownership of all mainland China operations by next year. This is part of JPMorgan’s four-year investment plan in the country.
In addition to JPMorgan, various global finance companies are seeking to expand operations in China. Many of the firms have already started taking advantage of the available options therein. Earlier this week, Citigroup (C - Free Report) became the first U.S. bank to get a domestic fund custody licence from China-based regulators. Several other firms like Goldman Sachs (GS - Free Report) , BlackRock, Nomura Holdings, Morgan Stanley (MS - Free Report) and UBS Group have either won approval or are waiting for the same to increase stakes in their respective JVs in the country.
Shares of JPMorgan have lost 27.1% so far this year compared with the industry’s 33.7% decline.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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