HONG KONG: In a strategic move demonstrating confidence in China's market, DBS Group's Chief Executive Piyush Gupta announced on September 25 that the bank is working to increase its stake in its China securities joint venture from 51% to an impressive 91%.

This announcement follows China's bold initiative to revitalize its struggling economy and capital markets.

DBS, Singapore's largest bank by assets, confirmed that it is the buyer of the stakes being sold by its Chinese joint venture partners, although the deal awaits regulatory approval.

Operational Expertise and Influence

Gupta emphasized that despite the increased ownership, the bank values the influence and operational expertise its Chinese partners bring to the venture.

Foreign Banks Expanding in China

This decision by DBS comes amidst a wave of foreign banks looking to enhance their presence in China, including well-known institutions like JP Morgan and Morgan Stanley.

These foreign players are seizing the opportunity presented by China's current foreign ownership cap, which allows them to engage more deeply in the lucrative but challenging Chinese market.

Recent Auction and Market Conditions

Notably, in July, four Chinese shareholders of DBS Securities China put up for auction a total of 40% of the joint venture for approximately 408 million yuan (about US$58.15 million).

However, there have been no recent updates regarding the buyers or the progress of stake transfers since that auction.

Challenges and Stimulus Measures

The decision to increase shares in the China unit comes at a time when securities firms are grappling with reduced profitability due to a slowing economy and weaker market conditions.

However, recent stimulus measures introduced by the Chinese government have rekindled hope for these firms.

Impact on Market Confidence

Following the announcement, stocks of listed securities brokerages in Hong Kong experienced a notable surge.

As part of its stimulus effort, the People's Bank of China unveiled a substantial swap program worth an initial 500 billion yuan (around US$71.24 billion).

This initiative is designed to give funds, insurers, and securities firms enhanced access to capital for stock purchases, further bolstering the investment landscape.

Outlook and Confidence in Recovery

Sebastian Paredes, DBS's head of North Asia and CEO for Hong Kong, expressed optimism about these stimulus measures, stating they should help rebuild confidence in the market, particularly through support for the real estate sector.

As banks like DBS navigate the complexities of the Chinese market, this strategic move is signaling not just resilience, but a strong belief in the potential for recovery and growth in China's economy.