It’s not quite working for free, but it’s pretty close.
Bloomberg News reports that competition among Chinese investment banks has become so intense that five firms recently agreed to split a 0.001% fee for arranging a private share placement. That compares with the more than 5% that’s usual for follow-on stock offerings on Wall Street, data compiled by Bloomberg show. It’s the latest example of a price war in China that helped cut average equity underwriting fees in half last year and prompted a trade group to call formeasures to prevent “vicious competition.”
The industry’s struggles are one of the biggest issues facing Yi Huiman as he takes on his new role as chairman of the China Securities Regulatory Commission: too much supply and not enough demand, with about 120 firms competing amid a plunging market and slowing economy. Brokerages have cut pay, reduced staffing and sued clients, and consolidation is likely in the longer term, according to David Yuan Wei, associate partner with McKinsey & Co.
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