Why does UBS support the new exchange?
UBS Group AG is the biggest investment bank in China controlled by foreign entities. Sources suggest that the bank now wants to circumvent its underwriting ban in Hong Kong and focus on a new exchange styled after US-based exchange NASDAQ. According to sources, UBS Securities, the Beijing-based company wants to gain more in fees via stock sales on the new exchange.
Dubbed STAR Market, the technology board could help the company improve its earnings via fees. It aims to get 20% of its share sale earnings from the Chinese mainland by the end of this year and a new exchange could be exactly what they are looking for. By next year, they want mainland China to contribute as much as 50% to its underwriting income. On the condition of confidentiality, the sources revealed that the company is already working with two first-time stock listings that expected to raise over 3 billion Yuan from the market.
Why is the new exchange important?
UBS is one of the two foreign firms that seek to benefit from the STAR Market which will be based in Shanghai. With the new market, it aims to be able to earn enough commissions to offset the revenue declines in Hong Kong. The losses will continue to rake in till April, as UBS was banned from underwriting. Hong Kong authorities fined the company $48 million and slapped it with a 12-month prohibition from offering share sales. The other entity is the Swiss Bank that has been swiftly expanding in the mainland.
China has a massive financial services market worth $43 trillion with highly lucrative fees. UBS Securities’ investment banking co-head Liu Wencheng said,
“We are actively mobilizing resources to dig and cultivate high-quality tech-innovation companies to tap the opportunity.”
However, Liu didn’t comment explicitly on their plans for the STAR Market.
Large deals are becoming less frequent on the mainland because of which UBS revenues of fees earned via debt sales reduced by almost half last year. The banking group now wants to focus on first-time entrants of the market to bring in a fresh infusion of revenue to its business. However, a company spokesman has declined to comment about STAR Market.