Australia
On January 11, the Treasury drafted legislation that that will make it easier for companies to issue bonds. A corporation will no longer have to prepare a full prospectus to issue bonds to retail investors, if it has already compiled one in the past three years.
In addition, company directors will not be held responsible if bonds are improperly marketed. Together these changes are likely to boost appetite for issuing bonds domestically as corporations look to diversify funding away from local equity and bank loan markets.
China
Chairman of the China Securities Regulatory Commission say the body is considering increasing the quotas for foreign institutional investors by up to ten times. Speaking at the Asian Finance Forum in Hong Kong on January 14 Guo Shuqing said the CSRC has been meeting with Hong Kong investors to share ideas on expanding the sizes of the qualified foreign institutional investor (QFII) and renminbi-QFII (RQFII) programmes as well as the scope of eligible institutions for the RQFII scheme.
“At the moment, QFII and RQFII put together just accounts for 1.5% or 1.6% of the total A-share market, so at least we can increase that 10 times or nine times for QFII and RQFII.”
No timetable was given for the changes.
China’s State Administration of Foreign Exchange (Safe) has allowed both foreign companies and state-owned enterprises (SOEs) to establish an automated, cross-border, sweeping structure for foreign currency in China.
Prior to the development, the cross-border movement of foreign currency funds was not permitted unless the transaction was supported by real underlying trade flows which had to be supported by several types of documentation.
Companies can now sweep their excess cash in non-renminbi currencies in China into one liquidity basket, usually located in major financial hubs like Singapore and Hong Kong.
Hong Kong
The Hong Kong Monetary Authority (HKMA) took a number of steps to improve liquidity in the offshore renminbi (CNH) market on January 16.
Banks are be able to secure short-term liquidity through the repo market with a settlement period of T+1 instead of T+2 as long as they post eligible collateral, including Hong Kong government bonds and offshore renminbi bonds issued by China’s Ministry of Finance. Repo fund are still only available for seven days.
In addition, renminbi currency futures can now be used to offset Hong Kong bank’s RMB net open positions (NOP). There remains a 20% limit on NOP.
In his first policy address on January 16, chief executive CY Yeung announced the formation of the Financial Services Development Council (FSDC).
Headed by Laura Cha, member of the Legislative Council and former vice-chairman of the CSRC, the will conducts research with the aim of proposal policy measures to the government. Members of the 22-strong commission have been drawn from five professionals with Mainland experience, five from foreign nations and the rest drawn from Hong Kong. Each will serve a two-year term.
In a speech on January 23, Securities and Futures Commission deputy CEO Alexa Lam outlined plans to establish a platform where funds approved in Hong Kong or China could be mutually recognised and sold in each other’s jurisdictions.
India
On January 7, the Reserve Bank of India (RBI) published a circular stipulating a series of proposed changes to the regulations governing forward contracts in corporate debt securities.
Repos are now permitted on commercial papers, certificates of deposit and non-convertible debentures, rated ‘AA’ or higher by a local rating agency, with a maturity of less than a year. Previously they were only allowed on listed corporate debt securities, rated ‘AA’ or higher, with a maturity of longer than one year.
In addition, the RBI has cut the minimum haircut required on repo transactions. For ‘AAA’ rated securities the minimum level has been reduced from 10% to 7.5%. For ‘AA+’ rated debt, the minimum haircut has fallen from 12% to 8.5% and ‘AA’ rated securities must now receive a haircut of at least 10%, down from 15%.
At the same time, the RBI revised its guidelines on credit default swaps (CDS) for corporate bonds, to include unlisted but rated corporate bonds in addition to the listed, rated bonds already eligible for CDS.
The RBI has also delayed the implementation of Basel III capital rules until April 1, from the original start date of January 1. The Bank gave no reasons for its decision to push back the rule adoption.
Meanwhile, the central bank has also published a draft report to encourage banks to extend fixed-rate rather than floating-rate loans by issuing more longer-dated debt in the form of 30-year bonds.
South Korea
The Financial Services Commission decided to delay to the implementation of Basel III rules for the nation’s banks.
The rules were due to come into force at the start of 2013, but on December 21, the FSC said it wanted to delay adoption of the rules so it could monitor how other countries implemented the rules. No timetable has been given for when the FSC will expect banks to adhere with its Basel III guidelines on capital ratios.
Taiwan
Bank of China Taipei has signed an agreement with the People’s Bank of Chian to become the official renminbi clearing bank for Taiwan as it prepares to become an offshore renminbi centre.
Meanwhile, Taiwan’s Central Bank for the Republic of China (CBC) has set a individual daily conversion limit of Rmb20,000 (US$3,180) while Taiwan ID cardholders can remit Rmb80,000 to the Mainland for current account transactions, identical to the limits set in Hong Kong.
In addition, chief executive of Taiwan’s Financial Supervisory Commission’s securities and futures division Huang Tien-mu announced that China is considering a Rmb100 billion (US$16.08 billion) renminbi qualified foreign institutional investor (RQFII) programme targeting both individual and institutional Taiwanese investors.