HSBC has reached an agreement to acquire its partner in the China fund management joint venture, according to two unnamed sources. This deal will enable HSBC to expand its presence in the second-largest economy in the world, as per insider sources.
Sources reveal, HSBC has signed an agreement with Shanxi Trust to buy the Chinese state-owned company's 51% stake in HSBC Jintrust Fund Management. HSBC currently owns a 49% stake in the joint venture.
The transfer of the 51% stake in HSBC Jintrust Fund Management from Shanxi Trust to HSBC is contingent on a public auction of the shares and regulatory review and approval.
Once approved, HSBC, the largest bank in Europe by assets and a significant player in the Asian market, would strengthen its foothold in China's fund management market valued at $3.8 trillion.
HSBC has not disclosed the amount it will pay to buy out Shanxi Trust's 51% stake in their joint venture, HSBC Jintrust Fund Management. The deal is still subject to a public auction of the shares and regulatory approval.
According to the joint venture's website, HSBC Jintrust had $7.7 billion in funds under management as of the end of March.
HSBC's move to increase its stake in the fund management joint venture is part of the bank's efforts to strengthen its position in China, which is in line with its strategy of expanding its presence in the country.
HSBC has been actively expanding its presence in China, with the bank converting its China insurance joint venture into a wholly-owned subsidiary in 2021, and increasing its ownership in its China securities joint venture to 90% last year.
Over the last few years, the bank has invested billions of dollars in China as part of an Asia-focused strategy to increase its market share across banking, insurance, and securities businesses in the country's financial sector, which is valued at $57 trillion.
In 2022, around 44% of HSBC's profit came from China, including Hong Kong and the mainland.
The bank's agreement to acquire its partner's stake in the China fund management business is part of its efforts to expand its presence in China.
Meanwhile, HSBC has been dealing with a campaign by shareholder Ping An to separate its Asia business for several months, but the bank successfully fought off a break-up attempt during its annual investor meeting last Friday.
HSBC is following in the footsteps of other global financial companies such as Manulife, JPMorgan, and Morgan Stanley in increasing their stakes in Chinese fund ventures since the removal of the foreign ownership cap in 2019.
To bring about the ownership change, HSBC Global Asset Management is planning an accelerated push to obtain regulatory approval, according to sources. However, the bank must first divest or sell a majority stake in Hang Seng Qianhai Fund Management, in which it indirectly owns a majority stake via its subsidiary Hang Seng Bank. This is due to China's “One Majority, One Minority” ownership rule, which limits companies to two fund units in China and allows them to hold majority control of only one.
