The Bank of New York Mellon Corporation
) is selling its 49% stake in China fund-management joint venture
(JV) to Shanghai Leadbank Asset Management Co, according to a
recent report in
The Wall Street Journal
. The sale of the unit - BNY Mellon Western Fund Management Co. -
reflects BNY Mellon's efforts to restructure its Chinese business
to suit the changing regulatory and market conditions. The value of
the deal, which is pending a regulatory nod, remains undisclosed.
The JV was established nearly four years ago. China's Shaanxi
Province-based Western Securities Co. owns the remaining 51% stake
in the JV. The unit has been reporting losses in recent quarters.
What Incited the Sale?
In order to enter the lucrative Chinese market, many foreign fund
houses had set up joint ventures with Chinese partners. BNY Mellon
was among those. With the recent changes in the regulations of
asset management business in China and opening up of the industry,
BNY Mellon has decided to make a fresh start of its management
business in the mainland. The latest deal is only a step toward
Further, the JV has been reporting losses in recent quarters. This
might have prompted BNY Mellon to offload its stake.
What China Offers Now?
Last year, China Securities Regulatory Commission loosened its
stringently controlled mutual-fund industry, allowing securities
firms, insurance companies and private funds to enter the market
for the first time. Before that, only licensed fund-management
firms were allowed to conduct such business.
In this new business environment, foreign companies are
re-strategizing their asset management business in China. Many are
contemplating setting up wholly owned enterprises in China, instead
of joint ventures, as the former would allow more room for
implementation of strategies.
We expect BNY Mellon to be able to grab this lucrative opportunity
with its balance sheet strength.
BNY Mellon currently carries a Zacks Rank #3 (Hold). Some
better-ranked bank stocks include
Central Pacific Financial Corp.
S&T Bancorp Inc.
Univest Corporation of Pennsylvania
). All these stocks sport a Zacks Rank #1 (Strong Buy).
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BANK OF NY MELL (BK): Free Stock Analysis
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