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HSBC Raises Stake in China Securities Joint Venture to 90%
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HSBC Holdings plc (HSBC - Free Report) raises its ownership stake in its China securities joint venture (JV) — HSBC Qianhai Securities Limited. HSBC, which earlier owned 51% of the JV, now owns 90% following the purchase of a 39% stake from its JV partner, Qianhai Financial Holdings.
HSBC Qianhai Securities, established in 2017, is headquartered in Shenzhen. It offers securities underwriting, brokerage and investment advisory services.
David Liao, the co-CEO of HSBC Asia-Pacific, stated, “China has one of the most significant capital markets in the world, supporting economic growth and investment opportunities. Our increasing stake in HSBC Qianhai Securities reflects our commitment in developing China's rapidly growing capital markets, and bolsters our presence in a key market for the HSBC Group, where we will continue to provide both clients in China and those overseas with professional financial services.”
HSBC, which generates a majority of its revenues from Asia, has been undertaking several measures to bolster its performance, with a special focus on building operations in the region, including Hong Kong and China. In sync with this, it acquired 100% of the issued share capital of AXA Insurance in Singapore for $529 million this February and agreed to acquire L&T Investment Management Limited for $425 million.
HSBC also intends to position itself as a top bank for high-net-worth and ultra-high-net-worth clients in Asia. Last year, the bank planned to shift its capital from the underperforming businesses in Europe and the United States to invest $6 billion in Asia over five years. The capital will mostly cater to amplify its wealth management business since management intends to target wealthy clients in mainland China, Hong Kong, Singapore and other parts of the region.
Notably, in 2020, HSBC initiated a digital-first, hybrid financial management platform — HSBC Pinnacle — in mainland China to bank on the increasing wealth in the region. In December 2021, it received the regulatory approval to acquire the remaining 50% stake in its China life insurance joint venture — HSBC Life Insurance Company Limited.
Over the past year, shares of HSBC have rallied 13%, outperforming 6.9% growth recorded by the industry.
Given that China’s $53-trillion financial market is now open to foreign firms, following the removal of ownership restrictions in 2018, several global banks have been rushing to capitalize on the lucrative prospect. The country has become the second-largest equity market globally. It is also one of the broadest and deepest growth markets outside the United States.
This led banks like JPMorgan (JPM - Free Report) and Goldman Sachs (GS - Free Report) to expand their operations in China. At present, several global banks, including JPMorgan and Goldman Sachs, either have approval for 100% ownership of their local securities venture or obtained a majority stake in their JVs.
Notably, JPMorgan and Goldman Sachs received approvals to own 100% of their onshore securities JVs in August and October 2021, respectively. Along with HSBC, GS and JPM have plans to expand in the country to diversify revenues, and increase their global footprint and market share.
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HSBC Raises Stake in China Securities Joint Venture to 90%
HSBC Holdings plc (HSBC - Free Report) raises its ownership stake in its China securities joint venture (JV) — HSBC Qianhai Securities Limited. HSBC, which earlier owned 51% of the JV, now owns 90% following the purchase of a 39% stake from its JV partner, Qianhai Financial Holdings.
HSBC Qianhai Securities, established in 2017, is headquartered in Shenzhen. It offers securities underwriting, brokerage and investment advisory services.
David Liao, the co-CEO of HSBC Asia-Pacific, stated, “China has one of the most significant capital markets in the world, supporting economic growth and investment opportunities. Our increasing stake in HSBC Qianhai Securities reflects our commitment in developing China's rapidly growing capital markets, and bolsters our presence in a key market for the HSBC Group, where we will continue to provide both clients in China and those overseas with professional financial services.”
HSBC, which generates a majority of its revenues from Asia, has been undertaking several measures to bolster its performance, with a special focus on building operations in the region, including Hong Kong and China. In sync with this, it acquired 100% of the issued share capital of AXA Insurance in Singapore for $529 million this February and agreed to acquire L&T Investment Management Limited for $425 million.
HSBC also intends to position itself as a top bank for high-net-worth and ultra-high-net-worth clients in Asia. Last year, the bank planned to shift its capital from the underperforming businesses in Europe and the United States to invest $6 billion in Asia over five years. The capital will mostly cater to amplify its wealth management business since management intends to target wealthy clients in mainland China, Hong Kong, Singapore and other parts of the region.
Notably, in 2020, HSBC initiated a digital-first, hybrid financial management platform — HSBC Pinnacle — in mainland China to bank on the increasing wealth in the region. In December 2021, it received the regulatory approval to acquire the remaining 50% stake in its China life insurance joint venture — HSBC Life Insurance Company Limited.
Over the past year, shares of HSBC have rallied 13%, outperforming 6.9% growth recorded by the industry.
Image Source: Zacks Investment Research
Currently, HSBC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our Take
Given that China’s $53-trillion financial market is now open to foreign firms, following the removal of ownership restrictions in 2018, several global banks have been rushing to capitalize on the lucrative prospect. The country has become the second-largest equity market globally. It is also one of the broadest and deepest growth markets outside the United States.
This led banks like JPMorgan (JPM - Free Report) and Goldman Sachs (GS - Free Report) to expand their operations in China. At present, several global banks, including JPMorgan and Goldman Sachs, either have approval for 100% ownership of their local securities venture or obtained a majority stake in their JVs.
Notably, JPMorgan and Goldman Sachs received approvals to own 100% of their onshore securities JVs in August and October 2021, respectively. Along with HSBC, GS and JPM have plans to expand in the country to diversify revenues, and increase their global footprint and market share.