China, a huge capital markets opportunity?

June 21, 2010 | By Jim Kim

The idea that China looms as a huge opportunity for American banks seems almost cliché now. All banks have tried to establish toeholds in the alluring, but still vexing market. JPMorgan Chase (NYSE: JPM), for example, recently struck a joint venture deal with China 's First Capital Securities to underwrite stocks of domestic firms.

But while American firms try to figure out the market, local investment banks are flexing their muscle, not only on the mainland but throughout the region. The WSJ's Deal Journal notes that five Chinese banks ranked in the top 10 of core investment banking revenue earners in Asia, excluding Japan. Ping An Securities, the brokerage arm of Ping An Insurance Group, came in at No. 3 behind Goldman Sachs Group Inc. and J.P. Morgan Chase (Dealogic).

We're seeing more Chinese banks win mandates outside of China. At least one is underwriting stocks in Europe.

For the moment, however, the surge in underwriting business on the mainland is propping up these banks. Of the $32.2 billion in new stock issued this year, more than a third came from firms based in China, notes CNNMoney. High-yield issues have doubled. This represents an opportunity, but one that has been hard for American firms to tap historically.

We'll see if foreign banks can thrive alongside Chinese banks. Most agree that China 's investment banks will emerge as powerful global forces, perhaps sooner than rather than later.

For more:
- here's the CNNMoney article
- here's the Deal Journal article