SHANGHAI, Aug. 13 -- CHINA'S proposed re-opening of the nation's securities industry to foreign investment will stoke competition among overseas institutions for a precious permit but prices can be astonishing, industry experts said.

The stock market regulator is also expected to grant licenses to new Sino-foreign brokers in a cautious and case-by-case manner, which means any large-scale deregulation is unlikely, observers said.

China has said it would let foreign firms buy into domestic brokerages within the year after a two-year reform campaign which saw more than 30 troubled brokers closed.

Financial authorities in September temporarily stopped vetting applications submitted by overseas institutions seeking ownership investments in mainland brokerages in a move to win time for local firms to be more competitive.

"It will definitely be a battle," said Wu Ke, a Zhongtian Investment Consulting Co analyst. "Although forming a joint-venture brokerage is expensive after two years' of a bullish run, overseas financial giants also can't afford to miss the chance."

Media reports early this month said that Credit Suisse and Citigroup were competing for a Chinese mainland partner to set up an investment-banking venture.

Credit Suisse last year scrapped its pursuit for then-troubled Xiangcai Securities Co, which later revamped by taking in domestic strategic investors, after failing to win regulatory support for the deal.

Merrill Lynch is also reportedly seeking a new Chinese partner to form a securities venture on the mainland after deciding not to team up with Hua'an Securities Co.

Only a small number of overseas companies have set up Sino-foreign investment-banking houses on the mainland, including Morgan Stanley's China International Capital Corp and Goldman Sachs Gaohua Securities.

About two years after sending its proposal, UBS AG early this year got regulatory approval to buy 20 percent of former Beijing Securities to become the first foreign firm to have management control of a mainland broker.

"Based on the UBS's case, foreign institutions are expected to go through lengthy proceedings before they can invest in a mainland broker," said Luo Meng, a Citic Securities Co dealer. "You won't probably see a deal done until the middle of next year."

Chinese yuan-denominated stocks have more than tripled in value since the start of 2006, bringing about hefty gains to brokers and helped them reverse four years' of losses.

However, improved profitability is set to make stakes in mainland brokerages, especially mid-sized quality players, much more expensive than two years ago, analysts said.

As mainland regulators are encouraging brokers to seek initial public offerings to raise funds for expansion, foreign institutions possibly hope to seek ownership purchase before the listings to reduce costs, they said.

"Buying publicly traded stocks with an aim to take a substantial stake is difficult to realize," said Wang Tianle, a Guosen Securities Co trader. "Overseas investors are likely to prefer securing a strategic stake in a Chinese broker ahead of its IPO just as what has happened to the banking industry."

The Shenzhen Stock Exchange said in a July research note that China should only open up its securities industry gradually and not allow foreign players to set up wholly owned subsidiaries in the near term.

China now caps foreign ownership at 33 percent in a Sino-foreign investment bank and 25 percent in a joint-venture brokerage.