China
China’s financial regulators released the 12th five-year plan for the country’s financial industry on September 12.
As part of the plan, the People’s Bank of China (PBoC) said it will increasingly rely on price tools such as interest rates over qualitative tools such as lending quotas in monetary policymaking as part of a broader reform plan for the coming years.
Price stability will be given greater prominence in its policy goals, the bank said, while open market operations (OMOs) will play a bigger role in adjusting money market rates.
Other reforms include opening up the onshore capital market and expand the portfolio outflow channel to increase the convertibility level of portfolio investment.
Additionally, the PBoC will continue with the reform of the renminbi’s formation mechanism, which includes a reference to a basket of currencies, the move towards supply-demand dynamics, leading to more two-way movements.
Regarding the bond market, by 2015 China hopes to perfect its “bond-issue management system and strengthen the coordination of various departments, interest disclosure requirements and the implementation of supervisory responsibility”. It also aims to bolster the market’s infrastructure to encourage innovation and diversification.
The plan was issued on the PBoC's website in conjunction with the China Securities Regulatory Commission (CSRC), the China Banking Regulatory Commission (CBRC) and others.
The National Association of Financial Market Institutional Investors (Nafmii) has changed its bond registration process to add a new level of transparency for investors in commercial paper (CP) and medium term notes (MTNs).
When companies register their MTN and CP programmes with Nafmii they have to provide information including their credit status, operational track record and arrangers for their debt deals. The process can go through multiple stages before the bond programme is finally registered.
Previously, investors only had access to the information published at the end of the registration process but under the new system they will be able to access the documents during each step of the registration procedure. Furthermore, companies must submit updated financial data to Nafmii each quarter which will also be made available to investors.
India
Reserve Bank of India (RBI) has written to the Indian government requesting that it amend laws forbidding Islamic banking in the country.
In June, the National Commission for Minorities (NCM) spoke up in favour of introducing such financing by submitting a proposal to permit interest-free banking. Following this, the finance ministry asked the RBI to reconsider the matter. Until this point, India’s central bank had insisted that Islamic banking was not viable in the country.
India boasts the world’s third largest Muslim population. The country is home to 180 million Muslims, equivalent to 10.9% of the global Islamic population, only behind Indonesia (with 12.7%) and Pakistan (with 11.0%).
Asian Development Bank (ADB) has launched a US$128 million guarantee programme for infrastructure bonds.
Developed with the India Infrastructure Finance Company Limited (IIFCL), the ADB as well as domestic finance companies will provide partial guarantees for rupee bonds issued by Indian companies to finance infrastructure projects.
This will boost the credit rating of the debt from around ‘BBB-‘ to ‘A’ or ‘AA’, thus enabling pension and insurance companies to invest in the bonds, says the ADB.
The first guaranteed bond will be issued by GMR Group, which wants to sell a bond to refinance a loan taken to build on a toll expressway linking Hyderabad and Bangalore. Over the next three years, the ADB hopes the scheme will guarantee up to five similar infrastructure project bonds.
The RBI has raised the ceiling for the external commercial borrowing (ECB) of Indian corporations.
The amended regulation on September 11 raised the ceiling for the amount a company can borrow through ECBs, to use either for repayment of rupee loans or for future capital expenditure in rupees.
Previously, the ceiling was set at 50% of a company’s average export earnings in the last three fiscal years. Now, corporations can choose between 50% of its foreign exchange earnings over any single year of the past three years, or 75% of its average foreign exchange earnings over the previous three years, whichever is the higher figure.
The maximum limit for any corporation under the ECB borrowing scheme is US$3 billion.
The Indian central bank is also proposing legislation that will give standalone primary dealers – including the India units of some international banks – access to the domestic corporate bond market for the first time.
Citing a draft of the legislation, Reuters first reported in September that RBI may allow standalone primary dealers to borrow as much as 50% of their call money market funds, or net-owned funds, to invest in corporate bonds.
RBI lists eight of such standalone primary dealers in India: Deutsche Securities, Goldman Sachs (India) Capital Markets, Morgan Stanley India Primary Dealer and Nomura Fixed Income Securities – which are all owned by overseas banks - as well as ICICI Securities Primary Dealership, PNB Gilts, SBI DFHI and STCI Primary Dealer, whose parents are domestically based.
Standalone primary dealers are treated as separate business entities from their owners, while primary dealers are operated by their parent.
New Zealand
The New Zealand Debt Management Office (NZDMO) has announced its intention to issue an inflation-indexed bond, dependant on favourable market conditions.
“No issue will be completed prior to 1 October 2012. After that date, issuance will depend on suitable market conditions,” reads the announcement, published on the NZDMO website on September 10. ANZ, Deutsche Bank, HSBC, RBS and UBS are bookrunners, and the bond has a proposed maturity date of September 20, 2025.
As part of the 2012 budget, NZDMO announced it would issue up to US$2 billion worth of inflation-linked bonds in each of the next two fiscal years.
Pakistan
The Securities and Exchange Commission of Pakistan (SECP) has published draft regulations which would allow Islamic bonds or sukuk to be issued in the country. The ‘Issue of Sukuk Regulations 2012’ is now open for consultation.
The regulations cover what criteria issuer must meet if it wants to issue a Islamic bond including holding a minimum ‘BBB-‘ rating and having out overdue loans. They also detail the disclosure requirements for sukuks and the penalty for breaching any of these rules.
Taiwan
The Financial Supervisory Commission (FSC) is seeking agreements with Cambodia, Indonesia, Malaysia and Thailand to establish a banking presence in the markets.
It believed to be driven in part by Taiwan’s upcoming role as a renminbi clearing centre.
FSC chairman Chen Yuh-chang publicly announced Wednesday (October 3) that Taiwan is seeking memorandums of understanding (MOU) with the four countries, in a bid to diversify its banking focus from China and establish an early presence in the emerging markets as their business needs continue to develop.
Taiwanese banks could be a natural fit in Southeast Asia, given product manufacturers based there supply to Taiwanese companies.
Thailand
The Ministry of Finance (MoF) announced in a press release on September 10 that it will not allow foreign entities to issue baht-denominated bonds in Thailand from September 1, 2012 to May 31, 2013, the first time it has rejected all applications during its three-times-a-year approval process.
Usually the MoF invites foreign entities that are interested in issuing baht-denominated bonds in Thailand to submit an application to the Finance Minister during the months of March, July, and November every year.
On June 19, it allowed five foreign entities to tap the local currency bond market before January 31, 2013. They include the World Bank’s International Bank for Reconstruction and Development (IBRD) with an approved of THB5 billion (US$163.2 million), International Finance Corporation (IFC) with THB5 billion, Swedish Export Credit Corporation (SEK) with THB5 billion, Korea Gas Corporation (Kogas) with THB8 billion and Kookmin Bank with an amount of THB10 billion.