This may prove to be a landmark year for China's capital markets with the sci-tech innovation board, or STAR Market, kicking off groundbreaking reforms.
Pedestrians walk past the Shanghai branch of UBS. (Photo: China Daily)
It is also a landmark year for UBS Securities, which is operating as the country's first foreign-controlled securities firms for the first year.
UBS Securities was one of the first foreign investment banks to enter the Chinese market and was registered as the first fully-licensed securities joint venture in 2006. In December last year, it became China's first foreign-controlled securities firm after the parent company UBS AG increased its stake to 51 percent.
Under the umbrella of the Switzerland-headquartered global financial group and having done business in China for more than a decade, UBS Securities tries to leverage its global network and local expertise to offer a comprehensive suite of services and shape its unique competitiveness.
This year, UBS Securities is sponsoring two IPOs on the STAR Market and was licensed to be a market maker of the Bond Connect in July.
Eugene Qian, president of UBS Securities and a member of UBS Asia-Pacific Executive Committee, said the launch of the STAR Market, with the trial registration-based initial public offering system more in line with global practices, has provided a strategic opportunity for UBS Securities to bring "the real value of a global investment bank" into China.
Qian, who is also an investment banking veteran with almost 25 years of industry experience in London, Hong Kong and the Chinese mainland, said the performance of the STAR Market has been "so far, so good", and the board will potentially usher the development of China's A-share market into a new era with accelerated market-oriented reforms.
"Streamline market regulation and reduce administrative control. Empower institutional investors and leading securities firms, regardless of whether they are Chinese or foreign, to compete on a level playing field. We look forward to further reforms in these directions as they will give the market a bigger say in resource allocation," Qian said.
In a recent exclusive interview with China Daily, Qian shared his views on Chinese market opportunities and how UBS Securities plans to tap into them.
China's capital market reform and opening-up has accelerated, represented by the launch of the STAR Market, or the sci-tech innovation board. What opportunities has this process provided for your company? How do you plan to align business strategies with these opportunities?
The launch of the STAR Market is a good strategic opportunity for us. We particularly welcome the trial registration-based IPO system of the new board and have been leveraging our global expertise in selecting and sponsoring IPO deals on the STAR Market. One of our clients, Shanghai Haohai Biological Technology Co Ltd, will be formally listed on the STAR Market on Oct 30, and we will have more clients coming through our pipelines.
We want to bring the real value of a global investment bank to the STAR Market, by not only running the process to get IPO approvals, but also facilitating efficient price determination of new stock issuance. For instance, we can leverage our access to both global and local institutional investor communities to price a firm more accurately. This sort of total solution may distinguish us from many domestic peers.
Looking forward, we are also eager to explore secondary-market brokerage and market making services. As the STAR Market becomes more sizable with stabilizing trading volume and volatility, possibly in the next few quarters, I think more big institutional investors, including those from abroad, will be open-minded to join STAR Market secondary trading.
We've heard that ChiNext on the Shenzhen Stock Exchange plans to experiment with the registration-based IPO system, which we will totally welcome. We are reasonably hopeful that the IPO system reform is going to have a positive, long-term effect on the domestic stock market.
In which business segments may UBS Securities consider expanding investment in China?
We are eager to continue to focus on our traditional business areas by leveraging our key strengths: global network and cross-border capabilities, in terms of both offering cross-border merger and acquisition advisory services, and introducing international capital to China's onshore capital markets, whether equity, bond or derivatives markets. UBS Securities is a leading broker for northbound trading under the stock connects and was licensed to be a market maker of the Bond Connect in July.
We are also expanding into more capital-intensive business areas. We plan to selectively utilize our capital to support our most critical clients, so that we earn not only advisory revenue and diversify the revenue stream.
The government has announced a series of policies to further open the economy to foreign investment. How are you planning to take advantage of those policy changes?
UBS AG, as a financial services firm, will continue to expand all our three business lines in China - wealth management, investment banking and asset management - by taking advantage of new opening-up policies.
Specifically, UBS AG completed raising its stake from 25 percent to 51 percent in its securities joint venture UBS Securities in December, which made UBS Securities the first foreign-controlled securities firm, with a full license, in China.
Following the latest policy announced by the Chinese government, by next year, UBS AG should be allowed to increase its stake up to 100 percent and is open-minded toward expanding investment in UBS Securities, while appreciating the strategic value of local partners. We look forward to the further acceleration of opening-up in this area.
How do you evaluate the performance of UBS Securities after becoming the first foreign-controlled securities firm in China? How do you see the profitability outlook of your company?
I would call it a profitable business, and we can be more or much more profitable going forward, provided that we fully leverage our global strength and local expertise to differentiate our competitiveness.
For foreign securities firms to be more successful in China, we call for more market-oriented regulatory relaxations, such as in terms of how securities firms are allowed to serve and charge their clients.