The week in renminbi: Star opens for trading, financial regulators mull more open-up, China makes large purchase of US sorghum
In this round-up, the Shanghai Star market officially opened on Monday morning, the People’s Bank of China, the China Securities Regulatory Commission and the China Banking and Insurance Regulatory Commission formally announced 11 market reform measures, and the Mainland made the largest sorghum purchase from the US since last April.
A total of 25 companies started trading on the Shanghai Science and Technology Innovation Board on Monday morning at 9:30am.
Four companies started trading at 200% of their IPO prices. Anji Microelectronics, a microelectronics supplier in Shanghai, saw its shares start trading at a whopping 287% of its IPO offering price.
In other related news, the Shanghai Stock Exchange announced last Friday that it will set up an index tracking 50 selected stocks on the Star market. The index will be announced after 11 trading days, by which time there will be 30 companies officially trading on the board.
China issued a set of measures on Saturday afternoon focusing on further opening up the financial market.
The PBoC will allow foreign credit rating agencies to conduct rating services for all kinds of bonds in the interbank and exchange markets, according to a statement. That said, S&P Global Ratings has already received the green light to rate all kinds of bonds in the domestic market. The rating agency also gave its first rating to ICBC Financial Leasing on July 12.
The Chinese regulators additionally encouraged foreign financial institutions to participate in setting up and investing in onshore banks’ wealth management subsidiaries. Foreign asset management firms can also set up wealth management joint ventures (JVs) with Chinese banks or insurance companies and serve as controlling shareholders.
Other measures include allowing offshore financial institutions to establish and buy stocks in pension funds and money brokers and lifting the 51% threshold of foreign ownership in Chinese life insurers, securities firms, asset management firms, and futures trading firms in 2020, ahead of the previously announced 2021.
Finally, China will also allow foreign institutions to obtain underwriting licences in the interbank bond market for all bonds, and not just bonds issued by offshore non-financial corporations.
By now, three foreign banks – HSBC, Standard Chartered and BNP Paribas – have already obtained the “type-B” licence which allows them to act as lead underwriters of bonds issued by non-financial institutions.
“Overall, this is the most detailed framework for foreign investors so far,” Tommy Xie, head of Greater China research at OCBC Bank, wrote in a Monday note. “It will grant more access for foreign investors to participate in business such as insurance, wealth management, pension fund and investment bank other than the interbank bond market, rating and security brokerage and money brokerage.”
Finally, the State Administration of Foreign Exchange (Safe) said in a Thursday press conference last week that it would further ease foreign investors’ entrance into the Chinese market by lifting or eliminating the quota requirements for the Qualified Foreign Institutional Investors (QFII) and Renminbi QFII schemes.
QFII is a dollar-based scheme that grants a licence to foreign investors to invest in the Chinese capital market including stocks and bonds. RQFII is its renminbi-denominated sister programme.
China bought 51,072 metric tonnes of sorghum, a kind of flowering plant, from the US, the biggest purchase since last April, according to data from the US Department of Agriculture.
The Central Commission for Discipline Inspection plans to expand its anti-corruption campaign offshore by embedding officers in Belt and Road countries, Xinhua reported.
Steven Mnuchin, US secretary of the treasury, and Robert Lighthizer, trade representative, had a phone call with China’s vice premier Liu He and minister of commerce Zhong Shan on Thursday evening, according to an official statement by the Chinese Ministry of Commerce.
The statement said the two sides exchanged views on how to implement the agreements between Chinese president Xi Jinping and US president Donald Trump in Osaka.