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BlackRock (BLK) to Expand in China With Majority Owned JV

Zacks Equity Research

One of the world’s largest asset manager, BlackRock BLK along with Singapore-based Temasek Holdings (Pte) Ltd and China Construction Bank Corp have agreed to form an asset management joint venture (JV) in China, per persons familiar with the matter. A memorandum of understanding has already been announced internally by these companies.

Nonetheless, the deal is still subject to regulatory approval. Regulatory changes in China now allow foreign financial firms to own majority stake in JVs.

BlackRock and Temasek will hold majority stakes in the new venture due to ownership restriction of asset management units by China banks. China Construction Bank has already set up an asset management partnership with Commercial Bank of China Ltd and hence, can’t take ownership interest in another similar JV.

This move is in sync with BlackRock’s efforts to seek growth opportunities in China. In April, CEO Larry Fink had said that he wants the company to become one of the leading asset managers in China and considers it as one of largest sources for growth.

BlackRock already manages assets of a lot of high-net-worth clients in China. However, as the country further opens up its financial sector for foreign companies, the company wants to take advantage of this and expand in the region.

Apart from BlackRock, various other finance companies are seeking to expand operations in China as the country announced plans to remove foreign ownership limits on financial firms by 2020, with the target of opening up the industry worth $44 trillion to international competition.

In fact, UBS Group AG UBS, JPMorgan JPM and Nomura Holdings Inc NMR have already received regulatory nod for acquiring majority stake in local JVs in China.

Notably, BlackRock is also looking for ways to develop a partnership with China’s Internet giant — Tencent Holdings Ltd. At present, the talks, which have been going on between the two over the past year, are at an initial stage.

Shares of BlackRock have rallied 27.2% year to date, outperforming the industry’s rise of 11.8%.

Currently, BlackRock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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