Here's a story sure to tantalize some investors: China is now ready to permit foreign investment in its brokerage houses.
Why does this matter? Well ...
- It's China. That's enough by itself to grab the attention of many investors, who salivate as they multiply small sums by more than a billion people -- and run out of digits on their calculators. True, many of China's people are very poor and don't invest in stocks. But as more Chinese rise to the middle class, they'll be saving, spending, and investing much more money.
- The capital markets in China are already huge. China's stock market has grown more than sevenfold over the past three years.
Until recently, foreign companies were barred from owning stakes in Chinese brokerages. Now that the rules have changed, some of the companies we might see making such investments include Morgan Stanley
Keep in mind
Of course, there are risks involved. Any upcoming rule changes aren't guaranteed to benefit foreign companies, of course. China could also go through a major economic upheaval, with its brokerages experiencing massive volatility that affects its outside investors.
It's also important to note that the Chinese government has recently restructured its brokerages. According to Bloomberg, it's closed more than 20 brokerage firms, because of problems including financial losses and mismanagement.
So keep an eye on this development, if you're interested in how it might boost the bottom line of U.S.-based investment banks. As an alternative, you might find some promising China-based investments via our Motley Fool investment newsletters. Our Global Gains newsletter service, for example, focuses on international investments. Our Rule Breakers service also covers some international offerings, such as a China-based thermal power plant company. I invite you to try any of our investing services free for 30 days.
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