HSBC to Sell 39% Stake of Its China Brokerage Joint Venture Partner

On January 5, HSBC Holdings plc, a UK multinational investment bank, announced its plans to sell the majority of its stake in a China securities brokerage joint venture company. An exchange filing showed and a source familiar with the matter also disclosed the information.

State-owned Qianhai Financial Holdings, which owns 49% of HSBC Qianhai Securities, is auctioning 39% ownership of the business unit with an asking price of US $198 million (1.26 billion yuan). The move by HSBC to sell its equity ownership is partly triggered by the fact that the joint venture had a net loss of 135 million yuan (US $21.20 million) in 2021. The move is also part of a broader HSBC group restructuring exercise to exit smaller operations.

HSBC will bid for the entire 39% stake in the China securities brokerage joint venture in order to expand its banking business in China, the second-largest economy in the world. The auction expires on January 21. The auction comes only nearly a week after HSBC obtained regulatory approval in China to take full ownership of its life insurance joint venture in the country, as it continues expanding its non-core banking services.

The bank won Chinese regulatory approval for the joint venture firm in 2017. The joint venture was the first foreign majority-owned brokerage in China, which was gained by HSBC because of the rules that favor global financial firms to do business in Hong Kong.

Global Banks Are Finally Getting Access to Mainland China

Global banks and asset management firms have been boosting their stakes in their joint venture firms in China. Such moves started taking place when China first approved foreign majority ownership in some financial businesses in 2019. As reported by Finance Magnates media outlet late last month, Morgan Stanley plans to increase its stake in Chinese securities joint ventures to 94%. This will put the bank on track to take full ownership of the business. In July 2021, CitiGroup became the first foreign bank to win regulatory approval to establish a custody business in China, basically acting as a bank for Chinese investment funds. In August last year, JPMorgan received approval from the Chinese authorities to take full ownership of its investment trading and banking joint venture business in the nation. Moreover, Goldman Sachs obtained approval for a similar venture in October last year. As such approvals come in, China’s message is clear: it wants US financial institutions to bring more foreign investors into the country and assist Chinese people to purchase assets overseas. China eased restrictions on foreign ownership of financial services companies because the nation permitted that as part of a trade agreement reached with the Trump administration.