HONG KONG | 7 January 2011 2: 14 pm EST
HONG KONG (Reuters) - securities regulators approved Friday Chinese joint ventures of J.P. Morgan Chase & Co (JPM).(N) and Morgan Stanley (MS)(N), bringing banks one step closer towards the operation of China securities firms that they and other banks have long sought.
The decision should largely will allow the two banks from Wall Street to subscribe for shares and bonds in a market of values securities fastest growing worldwide.
But the two banks will have to wait five years before their joint ventures are able to start the most lucrative brokerage operations.
While foreign banks are attracted by China's rapid growth in economic and financial markets, find the right partner for joint venture and regulatory restrictions have delayed and sometimes derailed their attempts to enter Chinese markets.
"It was a gap, we had our franchise which filled now," said Zili Shao, Chairman and CEO of J.P. Morgan China operations. "But we have a lot of work to do to make the best use of this platform," he added.
Long-awaited approvals come just prior to the visit of Chinese President Hu Jintao in the United States from January 18.
Sun Zhe, Professor at Tsinghua University in Beijing studying China relations and the United States, said that China has made concessions in a show of goodwill before the visit of Hu.
The approval allows J.P. Morgan's do its maiden entry into the Chinese market while Morgan Stanley will make a come back after the release of a joint venture with China International Capital Corp (CICC) last year.
J.P. Morgan will establish a link to the first capital of Securities Co, a brokerage based in Shenzhen and 33% of the company.
Morgan Stanley during this time, is able to move forward with its new Chinese partner, Huaxin Securities Co. Ltd., also known as China Fortune Securities Ltd. Co.
Morgan Stanley was a participant at the start in China when formed a joint venture with CICC in 1995, she has recently sold its interest to a group of investors, including KKR, TPG GICs and Singapore.
BOOMING CHINESE MARKET
Morgan Stanley will hold a participation of a third party in the new joint venture, to be known as Morgan Stanley Huaxin Securities Co Ltd and registered and principally located in Shanghai.
Chinese markets IPO have taken off in the past two years, with aggregate proceeds of last year offers amounting to 69.5 billion, compared to only 9.5 billion in 2008, according to data from Thomson Reuters.
China has dominated Global IPOs, accounting for approximately 27% of the total volume of last year. Similarly, the market in China has more than doubled since 2008-172 billion in 2010.
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