French bank to tap Chinese securities market

Societe Generale, one of the largest banking groups in France, expects to set up a joint-venture brokerage institution in China following the country's further opening-up of the capital market. 

The bank's CEO Frederic Oudea made the remarks in a recent media interview. 

A number of foreign investment banks, including United Bank of Switzerland, Nomura Securities, and JPMorgan Chase, have announced similar plans since the China Securities Regulatory Commission released the Measures for the Administration of Foreign-Funded Securities Companies in late April. 

In the face of the aggressive newcomers, Chinese brokerage firms are mostly unfazed. 

Early this year, the person-in-charge of a domestic securities asset management company told NBD they welcome rather than be afraid of competition. Though foreign peers have richer experience, domestic securities firms have taken root in China, which will give them an edge. 

The non-banking research team of CITIC Securities recently said foreign brokerage firms might have obstacles in China due to different operating environment. In Europe and the U.S., the stock market has experienced hundreds of years of development, and has sophisticated systems and laws as well as a rich set of tools to control risks. Foreign investment banks have created diverse business models in the games with regulators and the market. In contrast, in China, bourses only have a history of less than 30 years, and more than 80 percent of their trading volume is contributed by individual investors. More importantly, there is no "T+0" trading system and the derivative market is still in the bud. 

Shanxi Securities Co expressed the same viewpoint, saying that China's new policy will absolutely draw a lot of foreign brokerage companies, but it's challenging for the joint ventures to fit in with the operating model of the securities industry in China.

It's widely believed that to shake up the landscape of China's securities industry is hard for foreign-funded brokerage institutions in the short run, but some industry insiders call for awareness of unexpected development. 

A source with a Shanghai-based securities company told NBD that the entry of foreign brokerage companies won't make much impact on the traditional business of domestic counterparts, but in the fields of innovation business, including derivatives, cross-border business, and high-end wealth management, the impact will likely be huge as foreign companies have more experience. 

In the medium and long run, foreign firms' involvement will impel domestic peers to improve their innovative business and will also drive China to construct a multi-level capital market, the source added. 

In a recent research report, Central China Securities also pointed out the short-term impact will be limited, but the entry of foreign companies will likely accelerate the mergers and acquisitions in the Chinese securities industry, especially among some listed securities firms.