Nomura Seeking Investment Banking Partner in China

 Nomura Holdings Inc., Japan’s biggest brokerage, is seeking a partner in China to help it establish an equity underwriting business in the world’s second best- performing stock market.

The push into China is part of Nomura’s goal to get 50 percent of revenue from outside Japan in the next two years, from 30 percent currently, Siggi Thorkelsson, head of Asia- Pacific equities, said in an interview yesterday.

“We cannot be a leading equities house in Asia without an onshore license in China,” said Thorkelsson, who’s based in Hong Kong. “We want to be able to underwrite equity transactions in China, so we’re looking for joint venture partners. It’s a very important agenda.”

Nomura is seeking a Chinese partner to profit from an expected rebound in initial public offerings as regulators allow companies to resume share sales. Credit Suisse AG and Deutsche Bank AG have won approvals for securities ventures that can underwrite offerings in Shanghai and Shenzhen.

Investor appetite for equities has been revived after the Shanghai Composite Index rallied 70 percent this year, making it the world’s second-best performing major benchmark. Chinese businesses may raise as much as 170 billion yuan ($25 billion) in local equity offerings in the second half of this year, according to Guotai Junan Securities Co.

Guilin Sanjin Pharmaceutical Co., China’s biggest producer of herbal lozenges, received bids from investors for 584 times the number of shares available in the electronic tranche of the country’s first initial public offering this year, regulatory filings last week showed.

‘Makes Sense’

China was the world’s second-largest market for share sales in 2007, with $59 billion raised, according to Bloomberg data. The total fell to $20 billion last year as the government banned share sales in September following a stock-market rout that dragged the Shanghai Composite down 65 percent in 2008.

“It makes sense for Nomura to set up a cornerstone for their business in China, which is probably exceeding Japan and catching up with the U.S. in terms of economic power,” said Fumiyuki Nakanishi, a Tokyo-based strategist at SMBC Friend Securities Co.

China’s economy is expected to grow by 7.2 percent this year, according to World Bank estimates released on June 22. Japan is expected to contract 6.8 percent, while the U.S. economy will shrink 3 percent, the World Bank said.

Lehman Acquisition

Nomura bought the operations of Lehman Brothers Holdings Inc. in Asia, Europe and the Middle East after the global credit crunch caused the Wall Street firm to collapse in September. The acquisition boosted revenue outside Japan to 30 percent of the total from 10 percent, Thorkelsson said.

“What the crisis has done is it has compressed our international development,” he said. “The development would otherwise have taken 10 to 20 years to accomplish and now it’s going to take us two to three years instead.”

The Lehman acquisition increased Nomura’s coverage of companies outside of Japan to 545 from 295, Thorkelsson said. The coverage will be expanded to 600 companies by the end of this year and to 650 by next year, he said.

“Nomura clearly has global aspirations, having taken over Lehman,” said Lode Vermeersch, chief investment officer of Shanghai-based KBC Goldstate, which oversees about $585 million. “It’s logical for them to be in China since it is one of the few economies in the world that is still growing.”

Source from Bloomberg