A possible next step would be for JPMAM to file an application for an increase of the ownership stake with the securities regulator, but the firm was not specific about its plans.
The firm is “pursuing its desire and intent to increase its current joint venture stake”, according to a statement, and any decision is subject to the agreement with its joint venture partner and the relevant authorities.
Shanghai-based CIFM was established in May 2004. Shanghai International Trust and Investment currently holds a 51% stake in the joint venture, according to the firm’s website.
JPMAM’s parent, JP Morgan Chase, said that it is well-positioned to provide China’s institutions and individuals with private banking and asset management services as the country’s economy and wealth continue to grow.
China opens up
China’s securities regulator in April relaxed joint venture ownership limits for foreign players, including asset managers and securities firms. Foreign players may now apply for a majority 51% ownership in a Chinese joint venture, according to guidelines released by the China Securities Regulatory Commission (CSRC).
So far, JP Morgan AM is the first foreign fund manager to express a desire to own a majority stake.
Having a stake in a Chinese fund management firm allows foreign players to participate in the country’s RMB 10trn ($1.58trn) retail asset management industry.
However, challenges in distribution and competition await foreign players that want to enter China’s retail market, according to industry sources.
In addition, Shanghai-based consultancy firm Z-Ben Advisors said in a research note that Chinese partners are unlikely to give up control.
“Z-Ben Advisors has canvassed all major domestic managers and there’s not a single one willing to sell a 51% stake to a global asset manager, no matter the price.”
JP Morgan’s securities firm
In the same statement, JP Morgan Chase said that its corporate and investment bank arm has submitted an application to the China Securities Regulatory Commission (CSRC) to establish a new securities company in which it would hold a 51% stake, increasing to 100% over the next few years as allowed by the new regulations.
“We will hire people, lend to businesses, support the development of markets and strengthen communities through philanthropic initiatives,” Jamie Dimon, the bank’s chairman and CEO, said.
The bank also appointed Mark Leung, who has been with the bank for 21 years, as CEO of China and will be responsible for the bank’s overall onshore and offshore activities in the country. Before his CEO role, he was the bank’s co-head of global equities and prime services.
Other firms that have submitted an application to the CSRC to hold a majority stake in a securities company are UBS and Nomura Holdings.
