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T Rowe Price mulls Citic Securities stake

By Samuel Shen and Edmund Klamann (China Daily)
Updated: 2010-03-16 09:36

SHANGHAI: US fund house T Rowe Price is in advanced talks to buy a stake in China's biggest asset manager from?Citic Securities Co, two sources with direct knowledge of the deal said on Monday.

A deal would give T Rowe access to China's fast-growing $400 billion mutual fund market and accelerate its Asia expansion, while bringing Citic Securities into compliance with domestic rules to avoid regulatory penalties.

T Rowe has been in talks with Citic Securities for months to buy a stake in China Asset Management Co and has completed due diligence on the target company, the sources said.

Citic Securities, China's biggest listed brokerage, has been told by regulators to sell a 51 percent stake in the wholly-owned fund unit, one of the sources said, in a deal that could be worth more than 9 billion yuan ($1.32 billion).

It was not clear how big a stake T Rowe would eventually buy or what other buyers may be in talks with Citic Securities, although no single entity can own more than 49 percent of a Chinese fund house.

"China Asset Management is a leading fund house which has been a cash cow for Citic Securities," said Chen Jiantao, analyst at China Jianyin Investment Securities Co, who expected the stake sale to be negative for the brokerage.

Citic Securities said on March 13 that it would sell part of its holdings in China Asset Management and China Securities Co, a brokerage unit, to bring it in line with regulatory requirements, as it seeks licenses for potentially lucrative new businesses such as margin trading and short selling of shares.

Citic Securities gave no details in its exchange filing about potential stake sales but said its plans were quite advanced.

Citic Securities shares rose 0.22 percent on Monday, outperforming a 1.21 percent drop in the benchmark Shanghai Composite Index.

T Rowe and other Western fund houses are ramping up expansion in Asia, where rapid economic growth has been boosting investment returns and driving demand for fund products from a rapidly growing middle class.

T Rowe last year entered the Indian fund market and last month kicked off business in China's Taiwan province. It is also planning to build a much larger hub in Hong Kong as it steps up hiring in Asia.

Buying a stake in China Asset Management would give T Rowe a foothold in the mainland, where the mutual fund market is expected to triple to $1 trillion in five years.

More than 30 foreign institutions, including JPMorgan, Credit Suisse and Morgan Stanley, have formed fund ventures in China.

Reuters