ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Companies

Morgan Stanley takes top stake in China unit -- via Taobao auction

Wall Street investment bank eager to penetrate newly opened up financial market

Morgan Stanley won an additional 5.5% stake in Chinese joint venture Morgan Stanley Huaxin Fund Management in a Taobao auction.   © Reuters

NEW YORK -- Morgan Stanley has taken an additional stake in one of its Chinese joint ventures in an auction on Alibaba Group Holding's online marketplace Taobao, as the Wall Street giant looks to boost its presence in China's newly opened up asset management industry.

Morgan Stanley bid 25 million yuan, or about $3.7 million, for a 5.5% stake in Shenzhen-based Morgan Stanley Huaxin Fund Management, according to a recent announcement on Taobao's auction platform. The investment bank will emerge as the joint venture's largest shareholder with a 42.9% interest, above Huaxin Securities' 39.6%.

Morgan Stanley formed the joint venture in 2008 with Huaxin, a financial group backed by the Chinese government.

The 5.5% position in the joint venture became available after another Shenzhen-based shareholder failed to put up the required funds. 

A court in Guangzhou administered the auction on Taobao, which is known best as an online retail marketplace and as the birthplace of China's biggest shopping event, Singles Day, but also has an auction platform similar to eBay's, often used by Chinese local courts for foreclosure auctions.

Morgan Stanley's move to purchase more shares in the fund management firm -- albeit through an unconventional channel -- came on the heels of the Chinese government giving JPMorgan Chase and Nomura Holdings the green light to set up majority-owned brokerages in the country, which was announced during a visit by U.S. trade negotiators to Beijing.

Market access has been a point of contention in the almost yearlong trade war between the U.S. and China. Beijing has taken steps to open up its financial market through regulatory reforms, allowing foreign companies to own up to 51% of a local joint venture.

Morgan Stanley Huaxin Fund Management, which offers 30 mutual funds, had about $39 million in revenue and $4.5 million in net profit in 2017, according to an assessment document released by the Guangzhou court.

American hedge fund giant BlackRock is also looking to establish an onshore mutual fund unit in China and has held talks with a handful of Chinese groups including the state-owned China International Capital Corp., the Financial Times reported Monday.

Outside of fund management, Morgan Stanley is also eyeing majority control in another joint venture with Huaxin, Morgan Stanley Huaxin Securities, according to a report by China's official news agency Xinhua.

Morgan Stanley CEO James Gorman told Xinhua last June that the bank wants to increase its stake in the local securities firm to 51% from the current 49%, and ultimately to 100%.

"Over time we would definitely look to move to a bigger presence in wealth management within China," Gorman told Xinhua. "That is a logical step for us."

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends May 26th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media