Australia
On November 1, parliament passed legislation that will allow retail investors to trade government bonds, formally known as Commonwealth Government Securities (CGS).
Under the scheme, which is due to start in the first half of 2013, retails investors will be able to buy a new product called a depositary interest (DI) which will give them the right to receive coupon and principle payments. However ownership of the CGS will remain with Austraclear, the clearing and settlement system for bonds in Australia.
China
China’s interbank bond market regulators – the People’s Bank of China (PBoC), the National Development and Reform Commission (NDRC) and the National Association of Financial Market Institutional Investors (Nafmii) –are instituting a new measures aimed at improving credit rating protocols, application processes and visibility for investors.
Nafmii is poised to announce new rules regarding the oversight of the credit ratings of bonds. As part of the initiative the regulator will differentiate between the models of ratings agencies, including firms that charge fees to either issuers or investors and those using publicly available information.
The China Securities Regulatory Commission (CSRC) increased the quota for the renminbi qualified foreign institutional investor (RQFII) programme nearly four times, giving the overseas arms of Chinese asset management companies unprecedented access to the mainland’s bond market. The increase of Rmb200 billion (US$32.1 billion) takes the overall quota to Rmb270 billion.
Onshore securities firms will also get greater access to China’s interbank and over-the-counter bond markets under new rules from the CSRC.
Brokerages with asset management functions now only have to allocate just 1%-2% of its assets under management as a capital buffer, down from the 2%-4% they previously had to hold. They can also reduce the percentage of assets they hold against their margin trading business, in which they buy and sell their own securities, from 10% to 5%.
In addition, the CSRC has allowed these securities firms to invest in all products in the interbank market - where approximately 95% of bonds are traded – and the over-the-counter market, giving retail clients valuable access to these instruments, too.
Hong Kong
The city’s Financial Services and Treasury Bureau is working on a bill that will provide tax exemptions on certain asset transfers for sukuk bonds in a bid to boost issuance of the instrument.
It is finalising revisions to the revisions on the Internal Revenue Ordinance and the Stamp Duty Ordinance which will prevent Islamic bond issuers from having to pay extra stamp duty. The bill is expected to the submitted an approved by the legislative council by the second quarter of next year.
India
The Securities and Exchange Board of India (Sebi) adjusted the rules regarding debt investment for foreign institutional investors (FIIs) on November 7.
Under the changes, FIIs will now be able to re-invest up to 50% of their debt holdings from the previous calendar year starting from January 1, 2014.
The regulator also reduced the time period that foreign investors can use up corporate debt limits from 60 days to 30 days.
Philippines
The Philippine central bank is introducing a new pricing benchmark for short-dated loans to combat a distortion in short-term rates.
The change is needed because the current rates which are used to price debt are much lower than the policy rate of 3.5%. The one-year government is currently yielding 0.883% while the 91-day T-bill rate is 0.439%.
As a result the Bangko Sentral ng Pilipinas (BSP) has been working on revised formula for the benchmark of banks’ lending rates in conjunction with the Bankers Association of the Philippines (BAP).
Local media reports say the BSP is planning to introduce overnight index swaps as the new benchmark but with a final solution expected to be announced before the end of the year.
Thailand
The Financial Institutions Development Fund (FIDF) is to return to the former role it held during the Asian financial crisis as the lender of last resort to the country’s financial sector.
The move is a reversal in policy after the implementation of the deposit insurance act in August 2008, which was intended to remove the need for the FIDF by collecting fees from the country’s banks to fund the insurance of financial institutions.
However under the new rules the FIDF, which is overseen by the central bank, will have to consult the government before making any investments to prevent a repeat of the THB1.4 trillion (US$45.6 billion) of losses it suffered during the financial crisis.
Vietnam
The State Bank of Vietnam will ban commercial banks from taking deposits and issuing loans in both foreign currencies and gold in a bid to boost demand for the dong. The ban is to due to come into force during the 2015-2016 fiscal year.
Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council in Vietnam, told local press that if banks raise deposits in gold they are at risk from price spikes which will lead to an uptick in bad debts as they are exposed to foreign currency risk.