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Broker seeks trust fund stake

HAITONG Securities Co became the first brokerage in China to deal in the trust fund business when it agreed to invest in a domestic trust fund firm, Bridge Trust Co.

The two parties, however, are still discussing the level of investment and the size of the stake and the deal is subject to regulatory approval, the country's second-biggest brokerage said in a statement to the Shanghai Stock Exchange yesterday.

The trust fund company, which owns net assets of 481 million yuan (US$70 million) and has a registered capital of 605 million yuan, is based in Zhengzhou, capital of Henan Province, and deals in asset management. Its net profit almost quadrupled to 102.4 million yuan in 2007.

"The deal can bring Haitong Securities not only a hard-won trust fund license but also enhances its advantages in investment banking and product design," said Liu Jun, an analyst at Changjiang Securities Co. "But as it still requires time for the brokerage to gain regulatory approval, we expect the deal won't benefit the brokerage in a year," Liu said.

Haitong's profit tumbled 39.49 percent to 3.3 billion yuan last year as the sagging stock market hit its business severely.

Other domestic financial institutions, such as the Bank of Communications and China Minsheng Banking Co Ltd, have expanded into the trust fund business.

Foreign institutions, such as Morgan Stanley and Royal Bank of Scotland Group Plc, have set up trust fund ventures in China, while Macquarie Group has applied to the country's banking regulator to buy 20 percent in Kunming International Trust Co.


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