China Renaissance has won regulatory approval to set up a joint venture securities company in Shanghai to develop its presence on onshore capital markets, having already firmly established its offshore credentials.
Fully licenced Huajing Securities will offer a range of services including stockbroking, IPO underwriting, proprietary trading, and wealth management, the Beijing-headquartered boutique bank said on Monday.
The aim is to provide a "one-stop" shop of fundraising options for Chinese companies that spans both onshore and offshore markets, including those seeking to switch between the two.
“Huajing Securities will help more [Chinese] companies under the new economy to return to the A-share market,” China Renaissance's chief executive officer Bao Fan said in a press release.
China Renaissance will hold a 49% stake in Huajing Securities through Hong Kong subsidiary Maxson Securities and will have day-to-day operational control, a spokesperson for the bank told FinanceAsia.
Shanghai Enlight Investment Holdings, the parent firm of Shenzhen-listed film and television production company Beijing Enlight Media, and Wuxi Qunxing Equity Investment Management will own the remaining 46.1% and 4.9%, respectively.
Set up in 2004, China Renaissance has fast become a major player in China’s buoyant technology sector, helping a batch of prominent companies including JD.com to go public in New York or in Hong Kong, as well as providing advisory services on finance and major M&A deals such as last year's merger of online duo Meituan and Dianping.
However, it has yet to tap into China's massive onshore securities business.
It has also not taken full advantage of the ongoing wave of Chinese take-privates as companies listed abroad look to return home, drawn by the prospect of higher valuations, better trading volumes, and a less demanding regulatory environment. Although it has helped some Chinese firms to de-list from US markets and forged strong ties with them, it has missed out on the re-listing side of the equation by not having an A-share licence.
Last year, 28 US-listed Chinese firms announced plans to de-list their shares in deals worth $33 billion, while another nine Chinese companies have announced similar plans so far this year in deals worth $6.2 billion, according to Dealogic data.
A-share team
China Renaissance set up a new A-share team last April to pursue Chinese companies listed overseas and usher them back to China to raise capital through new listings and other transactions, as part of its strategy to grow into a fully fledged investment bank.
The bank also signalled its intention to recruit experienced professionals from the upper ranks of China’s leading brokerages houses.
“We expect the A-share market to become a principal focus of our investment banking activities…and the recent trend of ‘go private’ bids to gain momentum as more companies see the strategic merit in this move,” Bao said in a statement at the time.
Dubbed the Onshore Capital Markets Solutions team, China Renaissance’s A-share unit currently has about 15 people and is headed by Wei Shanwei, a former CEO at Ping An of China Securities (Hong Kong). Wei joined the boutique bank last July and reports directly to Bao.
Huajing Securities is the second JV that has won regulatory approval under the aegis of a long-running but recently revised free trade agreement between Hong Kong and mainland China – the Closer Economic Partnership Arrangement.
The new entity follows in the footsteps of Shengang Securities, which was set up by three Hong Kong investors, including Mason Financial Holdings, plus 11 mainland Chinese firms. Last month it too was given the green light from the China Securities Regulatory Commission.
The latest CSRC approval hints at the Chinese regulator’s growing willingness to gradually open up the country’s still-tightly controlled onshore securities industry and offer a broader choice of investments to domestic investors.
Late last year, HSBC and Bank of East Asia said they were joining forces with state-backed Shenzhen Qianhai Financial Holdings to set up fully-licenced JV securities firm based in the Qianhai economic zone of Shenzhen in the southern Guangdong province.
UBS and Goldman Sachs have had a far longer presence on the mainland. But many Western banks have struggled to make money in China or have fallen out with their partners, particularly those banks without operational control of the partnership.
One example is Morgan Stanley, which set up CICC, China’s first Sino-foreign securities JV, in 1995 with China Construction Bank but gave up management control in 2000 and had no real influence on the business.
