Goldman Sachs And Morgan Stanley Triumph Over Control Of Chinese ventures

On 27 March 2020, the two Wall Street banks Goldman Sachs and Morgan Stanley received permission from Chinese regulators to take over majority control of their local securities joint ventures. It signals China’s strict action to lets its financial market continue to function despite the ongoing economic distress emerging from the outbreak of COVID-19.

China’s economy and financial market has been severely disrupted due to the outbreak of pandemic coronavirus in December 2019. However, there have been pressing concerns about whether China’s regulators would continue to boost the right of entry for the international group during this outbreak. The approval for these two banks on Friday indicated that the market opening has been pushed forward. As per the media report, Goldman holds 33 per cent of Goldman Sachs Gao Hua Securities whereas Morgan Stanley holds a 49 per cent stake in Morgan Stanley Huaxin Securities.

Further to this, the Morgan Stanley is planning to increase its stake to 51 per cent with the authorisation from the China Securities Regulatory Commission (CSRC). Similarly, Goldman stated that it also gained approval to increase its stake. This decision comes as China vowed to open its assets management and investment banking on 1st April 2020. China has decided to permit international banks to start their venture or apply for whole ownership of their partnership. These foreign banks are moving fast for seizing a projected $9 billion in annual earnings in investment and commercial banking. However, as per the media reports, China is also open for insurers in this situation.

Co-President of Goldman Sachs for Asia-Pacific, excluding Japan, Todd Leland stated that it is an important breakthrough in the development of the company’s business in China. He added that however, the company will be looking at the opportunity for 100 per cent ownership at the earliest. In contrast, Asia-Pacific Co-Chief Executive Officer and CEO of China at Morgan Stanley, Wei Sun Christianson, stated that China is where the core strategic focus of the firm lies while it remains a market in which the company and many of its clients seek substantial opportunity.

As per the media report, in the year 2004, Goldman Sachs hit the first Sino-foreign securities joint venture with Chinese financier Fang Fenglei. After that, many other western investment and commercial banks considered the same approach, which resulted that this model has become a common platform to get into China’s investment banking market. Addition to this, in the year 2018, UBS was the first international bank which increased its stake in China’s joint venture securities to 51 per cent whereas JPMorgan was the first US bank to gain approval to do so during the last months of the year 2019.

Global Economic Disruption: GDP Growth Expected to take Downturn due to COVID-19 Crisis

Governments globally are closing entire commercial sectors to safeguard the spread of novel coronavirus. But it could lead to a significant setback in Gross Domestic Product (GDP) figures, economists predict. A free fall in international stock markets seems to settle down as governments around the world have announced substantial stimulus packages to safeguard their countries’ economies. According to OECD Economists, most of the world’s economies are tend to show less growth in GDP compared to 2019, depending upon governments’ capability of the respective nations.

The manufacturing sector in China has been walloped during this situation. As per the Caixin/Markit data, China’s Manufacturing Purchasing Managers’ Index dropped down to 40.3 in February 2020, which is the lowest since the year 2004.

According to a JP Morgan report, by its chief global strategist Dr David Kelly, the negative impact of the social distancing will be mostly seen in the second quarter of the year 2020. The report says that it will impact airlines, casinos, sporting events, movies, cruises, restaurants and theatres, among other sectors. The report further expects that this would lead to negative quarter growth in both the United States and international economy, which is likely to rise the unemployment rate in the coming months. However, the report explained that there could be a drop in coronavirus curve and economy can be recovered through governments’ fiscal and monetary policies.

Overview of Morgan Stanley

Morgan Stanley (LON:0QYU) is a financial sector company which advises, creates, manages, trades and distributes capital for institutions, governments, and individuals. The company has many segments such as Wealth Management, Investment banking & Capital Markets, Sales & Trading, Research and investment management etc.

0QYU – Share Price Performance

At the time of writing this report, 30 March 2020 (1: 56 PM GMT) Morgan Stanley’s stock is trading at a price of USD 34.07 per share, a surge in the value of around USD 0.05 or 0.15 per cent.

As on 30th March 2020, the market capitalisation of the company reported to USD 54.39 billion. Morgan Stanley’s free float and outstanding shares reported to 1.21 billion and 1.60 billion, respectively.

At the time of writing, the annual dividend yield was reported to 4.12 per cent, and the annual dividend of the company was reported at USD 1.40 per share. The beta of the stock has been reported to 1.45, which indicates that the share price movement is highly volatile as compared to the movement in the comparative benchmark index.

Overview of Goldman Sachs Group Inc.

Goldman Sachs Group Inc. (LON:0R3G) provides financial services and advice to the organisations in respect to merger & acquisition, financing and other transactions. The company has many segments such as Investment Banking, Consumer & Investment Management, Investing & lending, Global market, sustainable finance and Research.Â

0R3G – Share Price Performance

The stock price of Goldman Sachs Group Inc. last traded at USD 159.81. There has been no change in a day trading session on 30 March 2020.

As on 30th March 2020, the market capitalisation of the company stands at USD 54.45 billion with the free float and outstanding shares of 339.06 million and 343.87 million, respectively.

At the time of writing, the annual dividend yield was reported to 3.13 per cent, and the annual dividend of the company was reported at USD 5.00 per share. The beta of the stock has been recorded at ~1.39, which indicates that the share price movement is highly volatile as compared to the movement in the comparative benchmark index.