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JPMorgan Plans to Buy 100% Stake in Futures JV in China

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As China opens its financial markets to foreign firms, JPMorgan (JPM - Free Report) seeks to eventually own 100% in its futures joint venture (JV) – J.P.Morgan Futures Co. This was first reported by Bloomberg earlier this week.

Notably, the limits on foreign ownership of futures business got scrapped on Jan 1 as part of China’s efforts to gradually open up financial sector to overseas players. Apart from futures business, insurance industry opened up for foreign firms for majority stake.

At present, JPMorgan has 49% stake in the JV, which was formed in 2007. Per the filings with the China Securities Regulatory Commission, the bank has applied for shareholding pattern change and seeks to buy more than a 5% stake in the JV.

If approved, JPMorgan will become the first foreign firm to have a majority ownership of its Chinese futures operation. China’s futures markets, dominated by approximately 150 domestic players, had transactions worth almost $30 trillion in 2019. Thus, this will open up a huge market for the bank.  

Earlier in December, JPMorgan finally received regulatory approval to set up a majority-owned securities JV in China. Also, in August 2019, the company won a 2% stake to gain controlling interest in its China fund management JV in an auction at the Shanghai United Assets and Equity Exchange. The deal is still subject to regulatory approval.

Shares of JPMorgan rallied 42.8% in 2019, outperforming the industry’s rise of 35.2%.

Currently, JPMorgan carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other than JPMorgan, several major global financial firms like Goldman Sachs (GS - Free Report) , Nomura Holdings, Morgan Stanley (MS - Free Report) , BlackRock (BLK - Free Report) and UBS Group have won approval or are waiting for the same to increase stakes in their respective JVs in China. Thus, once foreign companies are allowed to conduct business in the country without any restrictions, it will help in geographical expansion and boost revenues.

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