China approves ABN AMRO, Galaxy joint venture

China approves ABN AMRO, Galaxy joint venture

Dow Jones, Shenzhen, China

China has given approval to the Hong Kong unit of ABN AMRO Holding NV to acquire a stake in China's Galaxy Futures Co. from China Galaxy Securities Co., a senior official from China's top futures regulator said on Saturday.

This is the first time China has approved a joint venture futures brokerage, indicating the Chinese government is gradually allowing foreign companies to invest in local futures markets, although indirectly. Galaxy handles futures in metals and agricultural commodities.

Yang Maijun, director of the Department of Futures Supervision in the China Securities Regulatory Commission, confirmed the approval during a speech at the two-day China International Derivatives Forum, which started on Saturday. Talk of the approval had circulated among traders and analysts for days.

"ABN AMRO has already passed CSRC's inspection and review," Yang said, adding that one of CSRC's major goals is to invite foreign futures brokerages to participate in Chinese markets.

ABN AMRO's Hong Kong-based unit is widely expected to take a 30 percent to 49 percent stake in Galaxy Futures, analysts said before the announcement.

Meanwhile, the CSRC is also preparing to allow Chinese futures brokerages to invest in overseas markets, Yang said.

"After some new regulations are launched next year, we will allow qualified Chinese futures companies to set up branches in Hong Kong. We are talking to Hong Kong now and hope there will be some companies going there next year," said Yang.

Nicholas Ronalds, senior vice president of ABN AMRO, said at the sidelines of the forum his company has yet to get official notification from the CSRC.

But he confirmed preparations for the joint venture have reached a final stage.

"We will definitely launch our joint venture within this year," said Ronalds. He declined to say what stake his company planned to take in the venture.

Ronalds said he didn't expect ABN AMRO to get any profit from the joint venture in the next two to three years, and that his company is looking at the long term potential in the futures business in China.

"We will only invest in the joint venture (in the next two to three years) instead of getting a return," he said.