August 2, 2019 / 4:37 AM / 2 months ago

Morgan Stanley buys 2% needed for control of China securities joint venture

HONG KONG/BEIJING (Reuters) - Morgan Stanley (MS.N) moved closer to taking a controlling stake in its Chinese securities joint venture (JV) after picking up a 2% share for $54 million, exchange filings show.

FILE PHOTO: A sign is displayed on the Morgan Stanley building in New York U.S., July 16, 2018. REUTERS/Lucas Jackson/File Photo

Huaxin Securities signed an equity transfer contract on Aug. 1 to move the 2% stake in Morgan Stanley Huaxin Securities to the U.S. bank, according to a statement dated Aug. 2 filed to the Shanghai Stock Exchange by Huaxin’s parent, Shanghai China Fortune Co (600621.SS).

Morgan Stanley, which currently owns 49% of the JV, was the only bidder, the filing said.

An unnamed buyer will pay 376.2 million yuan ($54.24 million) for the 2% stake in Morgan Stanley Huaxin Securities, according to a separate notice on the Shanghai United Assets and Equity Exchange website dated Aug. 1.

The transfer still has to be approved by the China Securities Regulatory Commission (CSRC), and the JV’s business registration license must be changed by the Ministry of Commerce to reflect its foreign ownership, the filing added.

Morgan Stanley declined to comment.

Morgan Stanley Huaxin Securities, whose offerings include underwriting and sponsoring of stock and bond sales, told the CSRC earlier this year about plans to change its equity holdings, Reuters reported in June, citing people with direct knowledge of the matter.

The outcome of Sino-U.S. trade talks could, however, impact the approval timeline, the people said at that time, declining to be identified as they were not authorized to discuss regulatory matters with media.

U.S. President Donald Trump vowed, on Thursday, to impose a 10% tariff on the remaining $300 billion of Chinese imports from Sept. 1, escalating the bruising trade war between the world’s largest economies and jolting financial markets.

If the transfer is approved, Morgan Stanley will join rivals HSBC Holdings PLC (HSBA.L), JPMorgan Chase & Co (JPM.N), Nomura Holdings Inc (8604.T) and UBS Group AG (UBSG.S) in owning controlling stakes in onshore securities JVs in China under liberalized rules announced in 2017.

Lack of control and limited contribution to revenue have long been a source of frustration for Wall Street banks, and became a key issue in Washington’s push to persuade Beijing to open up its market for wider foreign participation.

Management control would allow foreign banks, including Morgan Stanley, to offer more services through their JVs and potentially leverage their global networks to win China market share, bankers have previously said.

Reporting by Cheng Leng in Beijing and Alun John and Julie Zhu in Hong Kong, additional reporting by Samuel Shen in Shanghai; Editing by Himani Sarkar

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