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| UBS spends £282m buying into Chinese bank |
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Swiss-American financial services group UBS has joined the growing ranks of companies investing in China, unveiling a plan to spend £282 million ($500 million) cementing its investment bank's relationship with Bank of China. The move follows recent efforts to exploit China's rapidly growing economy by other international businesses, including Royal Bank of Scotland, the banking group, Yahoo, the internet search engine, and Microsoft, the computing giant. Royal Bank of Scotland spent £900 million last month taking a 5 per cent stake in the same bank as part of a consortium that overall bought into a 10 per cent shareholding in the Chinese group. UBS said this morning that today's investment in Bank of China is just one part of its strategy to pursue ventures designed to "capture growth potential" in the Chinese markets.v The bank is also believed to be poised to invest £118 million taking a 20 per cent stake in Beijing Securities, in what would be the first investment in a Chinese brokerage by a foreign financial group. The bank offered no comment on this aspect of its China strategy this morning. But Peter Wuffli, the chief executive of UBS, said of today's deal: "We regard this agreement as a natural development of our long-term relationship with Bank of China. The combination of Bank of China's brand, distribution and customer base with UBS's products, services and experience will be powerful." Under the arrangement, which sees UBS take a 1.6 per cent stake in Bank of China, the two groups have agreed to be preferred partners in a variety of investment banking and related areas in China and for Chinese customers. The two banks also signalled they might further strengthen their relationship, saying they would "co-operate in operational matters relating to these business areas" as well. Analysts at Keefe, Bruyette and Woods described UBS's move as "strategically inevitable - for a global investment bank the potential size of the Chinese market is too large to ignore". Although the investment is too small to have a "meaningful effect" on group profits, and the price paid for the stake "seems broadly in line" with what RBS paid, Vasco Moreno and Matthew Clark at KBW said that the "revenue benefits are likely to be fast". The two analysts pointed out that UBS is working alongside Goldman Sachs as an underwriter of the forthcoming Bank of China flotation. "As such, UBS is likely to see the benefits of this investment rapidly in the form of meaningful IPO fees," they said. Yahoo last month agreed to pay $1 billion for a 40 per cent stake in Alibaba.com, an online auction group based in China. Source: www.timesonline.com Sep 27, 05 |
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