UBS made two big China moves this week. The first was to formally apply for a majority stake in its domestic joint venture.
"UBS Group CEO Sergio Ermotti said earlier this year that UBS continues to work towards increasing our stake in UBS Securities Co Ltd to 51%," the bank said on May 3. "We are pleased to confirm a key milestone in this process with UBS Securities submitting an application to CSRC to allow UBS AG to increase its stake in the joint venture to 51%. We understand that CSRC is now reviewing the application."
The second was the launch its first onshore fixed income fund, called UBS (CN) China Ultra Short Income Bond Private Fund Series 1, through its wholly foreign-owned enterprise entity in Shanghai. Brian Lou is the fund manager. UBS also has a qualified domestic limited partner licence in China and a private fund management licence. It first onshore equity fund for local investors was launched last November, the bank added in a press release.
But the JV fever did not end with UBS. Nomura is following suit with plans to establish a China JV entity, according to Japanese media reports.
"We are currently preparing to apply for a license to set up an onshore securities business in China, but we are unable to comment on the details at this stage," a spokesperson said in a written statement.
Along the same lines, ICBC-Axa Life Insurance, an existing insurance JV established in 2012 in Shanghai, has decided to set up an asset management JV, the organisation said on May 4. The new JV will have a registered capital of Rmb100m. The JV will focus on RMB and foreign currency funds. The insurance JV has already accumulated investments worth Rmb100bn, the firm's chairman, Ma Jian, said in the statement.
China opened its iron ore futures market on the Dalian Commodity Exchange (DCE) to foreign traders starting on May 4, in a bid to provide an RMB-denominated pricing benchmark for the global iron ore market.
"China, as the world's largest importer and consumer of iron ore, has the obligation to provide an open, transparent and fair price benchmark reflecting the real supply and demand situation on the global iron ore market," said Li Zhengqiang, chairman of the exchange.
China first launched its iron ore futures contract on the DCE in October 2013.
The country's iron ore imports increased to a record high of 1.075bn metric tons last year, up 5% year-on-year, the DCE said in a May 3 statement. In 2017, DCE's iron ore futures volume totalled 329m lots, the equivalent of 32.9bn tons. That is over twenty times the total amount of iron ore swaps and futures transactions on the Singapore Exchange, the world's second-largest iron ore derivative market, the exchange noted.
US-based market access and data provider CQG said in a May 4 press release that it had linked up with the DCE to offer its global clients access to the RMB iron ore futures contract. The firm already offers the oil futures contract traded on the International Energy Exchange in Shanghai.
Shenzhen Stock Exchange (SZSE) and Shanghai Stock Exchange (SSE) jointly won the bid for a 25% stake in Dhaka Stock Exchange (DSE) in Bangladesh, the exchanges announced on May 3. The deal has been approved by regulators of both countries, with final approval from the Bangladesh Securities and Exchange Commission coming on the day of the statement, they added.
"With concerted effort, the Consortium and DSE will participate in and support the Belt and Road Initiative, contributing to the sound development of both capital markets," the exchanges said in the notice.
The Asian Infrastructure Development Bank added Papua New Guinea and Kenya in its latest batch of new members, the Chinese Ministry of Finance said on May 4. AIIB now counts 86 countries in its ranks, of which 57 were founding members.
Two foreign companies were granted licences to operate in the domestic financial markets, according to two separate May 4 news reports. WorldFirst, an international payment company, applied for a third-party payment business licence with the PBoC, while Experian, a UK provider of consumer and business credit reporting, has also applied with PBoc to offer corporate credit information services in China. Foreign credit rating services received the green light to enter the domestic market in May 2017.
The latest RMB payments tracker data from Swift shows the RMB holding a 1.62% share of global payments, coming in the sixth position overall.
In a May 4 report, Swift also noted that London keeps its crown as the key RMB foreign exchange trading hub, with 38.6% of RMB FX confirmations. Trading in the Chinese renminbi (RMB) is relatively small compared to total volumes, however, and over 96.525% of RMB trading by value on SWIFT is against the dollar.
Close to 75% of wider RMB-denominated activity still takes place in Hong Kong, with a particular focus on commercial payments, where the Hong Kong share is 77%.
People moves:
Deutsche Bank, which is attempting a broad corporate restructure following the appointment of a new CEO in Frankfurt, has also rejigged its Greater China global transaction banking unit, the bank said on May 4. Dirk Lubig is the new head of GTB China and also the head of corporate cash management for Greater China, based in Shanghai. Former head Mahesh Kini has left the bank.
Lubig is a former Bain & Company consultant who joined Deutsche in 2013 in its strategy department and moved to the global footprint rationalisation programme in 2016.
"Asia, and specifically China, continue to be strategically important growth markets for Deutsche Bank," the bank said in a statement. "Therefore we are committed to strengthening our capabilities in this region. An important focus will be to continue to build strong relationships with German, European, and US clients in China and to attract Chinese MNCs to support their expansion abroad."
China people & markets round-up: China joint venture moves announced, iron ore futures go global, Chinese exchange greenlight Bangladesh acquisition
