Macquarie Group, Australia's biggest investment bank, plans a venture with Hengtai Securities to gain access to China's US$70 billion ($127 billion) equity and bond underwriting market, two people familiar with the matter said.
The Sydney-based bank last week signed a memorandum of understanding with Hengtai to form ajoint-venture company, the people said, asking not to be identified because no announcement had been made. Macquarie would take a 33 per cent stake in the venture, they said.
Macquarie is the third foreign investment bank to sign an agreement or win approval in the past six months for a venture in China, which has 103.6 million active securities accounts.
"It's certainly a good thing to find a place in China's securities market because you can tap pretty decent domestic growth," said Fang Jian, a Shanghai-based partner at law firm Linklaters.
Macquarie will negotiate final terms in the next few months before submitting a proposal to China's securities regulator for approval, the people said. The venture will have registered capital of 500 million yuan ($132 million) and will seek permission to underwrite stock and bond sales and provide financial advisory services, they said.
China Securities Regulatory Commission stepped up scrutiny of foreign investment last December, requiring local firms to attain at least a median-level ranking in their industry before making any tie-ups with overseas banks. Hengtai reached that threshold this year, the people said.
Macquarie's planned venture comes after the China Banking Regulatory Commission approved the bank's 20 per cent investment in Kunming International Trust last month, the people said.
