A Chinese Wall Street?
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Occasionally I look through the job postings of Wall Street firms. Companies can tell their own stories about the areas of the bank that are growing, or how their different strategies are playing out. You can quickly confirm these reports by looking at the job postings.
JPMorgan (NYSE: JPM), for example, is very much in need of programmers and private bankers. Of all areas of the bank, JPMorgan’s Global Wealth Management (GWM) arm – housed under its Asset Management division – seems to be growing the fastest – JPMorgan is often known for having the world’s best private bank.
Likewise, Goldman Sachs (NYSE: GS) also needs programmers for different initiatives, and the firm also needs equity analysts. However, I recall that the two firms had something in common that intrigued me – they both needed workers that speak fluent Mandarin Chinese. Taken from Goldman’s website: “Additional fluency in a language such as Mandarin, Japanese or Korean would be highly preferable.” I’ve also noticed postings that require expertise in only Mandarin.
Sounds odd doesn’t it? Not if you realize that Wall Street is expanding into Asia.
Chinese Joint Venture
Citigroup (NYSE: C) is the most recent company to expand its investment banking operations into China. According to The New York Time’s Dealbook, Citigroup is not ranked in the Top-5 investment banking firms in the U.S., Europe, or Asia. Goldman and JPMorgan are ranked first and third, and Morgan Stanley (NYSE: MS), which already does banking in China, takes the number two spot. Morgan Stanley did a total of 170 deals valued at $249 billion and took 22% share of the market, compared to top-ranked Goldman’s 25% share of 190 deals valued at $279 billion.
Also, Deutsche Bank (NYSE: DB) has entered the Chinese market. Deutsche Bank has done 116 deals worth $214 billion and commands an 18% market share. While DB is ranked as the fourth biggest player by deals, it has done the sixth-most deals in Asia.
Thus Citigroup is one of the later firms to bolster its investment bank and to move into China. But the company is doing the right thing by getting its foot in the door. Citi has partnered with Orient Securities to form Citi Orient Securities Co., which has a capitalization of $126 million.
To Citi’s dismay, Chinese law permits foreign firms to hold no more than a 33% stake in such ventures, but Citi will hope to grow this ownership after two years, at which time it can apply to the government to own more.
Though the capitalization is small, this is the right move for Citi. A JV in China puts the firm in front of a brand new market, and the company could further expand its Asian operations in Japan, Hong Kong, and Korea. Also, the joint venture is expected to advise on M&A deals in the automobile, energy, and entertainment spaces, which could help to immediately bolster market share.
Finally, Citi has already lined up 50 Class-A underwriting deals for initial public offerings. Understand that Citi certainly isn’t bringing a Chinese Facebook to market, or anything close to that size, but 50 deals is a major accomplishment. And I expect this number to grow.
Companies often begin gathering market share in new nations by forming joint ventures – so Citi is doing the right thing. Expect to see Citi’s banking presence rise in Asia, and look for Citi to make more job posts looking for Mandarin-speaking bankers.
ChrisMarasco has no positions in the stocks mentioned above. The Motley Fool owns shares of Citigroup Inc and JPMorgan Chase & Co. Motley Fool newsletter services recommend Goldman Sachs Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.