A sign is displayed on the Morgan Stanley building in New York U.S., July 16, 2018. REUTERS/Lucas Jackson

SHANGHAI/HONG KONG (Reuters) - Morgan Stanley has won an auction to buy an additional 5.5 percent stake in its China mutual funds joint venture, in a deal that will make it the top shareholder of Morgan Stanley Huaxin Fund Management Co.

The Wall Street bank, which currently owns 37.4 percent in Shenzhen-based Morgan Stanley Huaxin, won the bid on March 30 to buy the additional stake for 25.04 million yuan ($3.73 million), according to the auction notice on Taobao.com.

Morgan Stanley is buying the stake from a private shareholder in a court-appointed auction, which will see its stake surpass that of Huaxin Securities, which owns 39.56 percent of the joint venture. The purchase needs to be approved by China’s securities regulators.

Morgan Stanley declined to comment.

Moves by Morgan Stanley to boost ownership in the fund venture comes as China is opening up its financial sector worth trillions of dollars – from insurance to asset management and brokerage - for bigger foreign participation.

China has in recent months allowed many foreign financial institutions to either set up new businesses onshore or expand their presence through majority ownership in domestic joint ventures.

Under new rules announced in late 2017, Beijing has also paved the way for foreigners to own up to 51 percent in their local mutual fund ventures.

Besides the fund management business, Morgan Stanley also has a securities joint venture with Huaxin, in which the Wall Street bank raised its stake to 49 percent in 2017. The bank has previously expressed an interest in raising the stake further.

($1 = 6.7169 Chinese yuan renminbi)