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The week in review: Covid-19 pain spreads, Regulator wraps up Anbang takeover, Star to launch faster IPOs for virus-linked businesses

Impact
By Addison Gong, Rebecca Feng
24 Feb 2020

In this round-up, the number of global cases of the novel coronavirus has spiked, the China Banking and Insurance Regulatory Commission has concluded a two-year takeover of troubled Anbang Insurance, and the Star board will speed up the review process for IPOs from companies focusing on controlling the epidemic.

The number of new daily confirmed cases of Covid-19 within mainland China, especially in regions outside of Hubei province, has declined in recent days. However, the number of confirmed cases outside China spiked over the weekend. 

South Korea reported 763 cases by Monday noon Hong Kong time. The country raised the infectious disease alert to the highest level. In Europe, Italy became the most affected country. Over the weekend, the number of confirmed cases rose to 152 from just three last Thursday. 

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As the Covid-19 epidemic continues to spread, businesses around Asia are feeling the pain. 

Foxconn Technology, one of Apple’s largest suppliers, said that it is expecting a negative impact from the virus on the company’s full-year revenue, according to a statement filed on the Taiwan Stock Exchange. 

Ping An Insurance, China’s largest insurer, warned of the general performance of China’s life insurance industry, the Financial Times reported, citing James Garner, Ping An’s chief capital markets officer. However, Garner expected a rapid turnaround after the epidemic ends. 

Asian airlines are expected to lose $27.8bn of revenue this year, according to an estimate by the International Air Transport Association. Chinese carriers alone would incur a $12.8bn loss.

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Chinese president Xi Jinping chaired two politburo meetings in the past three days, one on February 21 and the other on February 23. The Friday meeting centred around discussions on the positive developments on controlling the coronavirus. Xi also encouraged local governments to implement different policies according to the level of seriousness of the epidemic in specific regions. 

During the Sunday meeting, Xi emphasised the need to prevent the country’s economy from suffering too much. He again encouraged putting in place different policies for different provinces and cities. 

But Xi appears to have failed to tackle some other issues. “We note that comments relating to the need to control the level of debt and leverage have not appeared in either of the high-level policy meeting statements,” Yu Song, chief China economist at Beijing Gao Hua Securities, wrote in a Monday note.

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Some 727 Chinese corporates have received special purpose re-lending facilitiesto fight Covid-19 as of Thursday last week, according to vice governor of the People's Bank of China, Liu Guoqiang. In an interview with a local newspaper, Liu said that the actual interest rate for the loans after a finance discount was about 1.3%.

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The Shanghai Star market, the technology and innovation-focused stock board dubbed as China’s Nasdaq, said it would launch a fast IPO review channel for companies related to epidemic control, state media Shanghai Securities News reported. 

The bourse will organise a group of auditors familiar with the biomedical industry to review companies’ applications. 

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China’s foreign currency reserves reached $3.1tr by the end of January, a $7.6bn increase from the end of 2019, according to data from the State Administration of Foreign Exchange last Friday.

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The China Banking and Insurance Regulatory Commission (CBIRC) concluded its two-year takeover of fallen Anbang Insurance on Saturday, according to a statement. 

CBIRC first took control of Anbang Insurance on February 23, 2018, due to the firm’s solvency issues. The takeover would last a year, the CBIRC had initially said. On February 23 last year, however, the banking and insurance regulator decided to extend the takeover period by a year. 

“Anbang Group’s liquidity risks have been effectively defused and its customers’ legal rights have been protected,” the CBIRC said in the statement. “Anbang Group’s insurance businesses have been taken over by the newly established Dajia Insurance Group. By far, Dajia Insurance Group can operate normally.”

Dajia Insurance was set up in June last year by the Chinese central government. Dajia is 98.2% owned by China Insurance Security Fund, which is controlled by the Chinese Ministry of Finance.

The regulator added that the Rmb1.5tr of insurance products, with short and medium durations, that Anbang Group sold before the takeover had been fully repaid by January this year. 

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Peking University Founder Group Co officially defaulted on a Rmb2bn 4.94% 270-day short-term commercial paper on Friday last week. The company had already failed to repay the bond at the start of December last year, but bondholders agreed to extend the payment deadline to February 21.

A Chinese court last week accepted an application for a restructuring of Peking Founder by one of its largest lenders, Bank of Beijing. The court appointed a team made of representatives from the People’s Bank of China, the Ministry of Education, as well as relevant financial regulators and officials from the municipal government of Beijing, to manage the process.

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The China Securities Regulatory Commission gave Xiamen Jinyuan Investment Group Co and President Securities Corp the green light to jointly set up an onshore securities house under a 51/49 partnership. The approval came three years after they applied. The new entity, expected to be named Jinyuan President Securities, is the first Chinese securities house with a Taiwanese parent.

The majority owner, Xiamen Jinyuan, is controlled by the finance department of Xiamen city in Fujian province.

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The government of Hong Kong appointed a new director to the board of Hong Kong Exchanges and Clearing (HKEX) last Friday. Susan Chow Woo Mo-fong has joined under a two-year term. Laura Cha May-lung and Benjamin Hung Pi-cheng were re-appointed.

Hong Kong’s financial secretary has the right to appoint up to six directors to the HKEX board, to serve alongside six others elected by shareholders as well as the chief executive. Charles Li Xiaojia has been the HKEX’s CEO since January 2010.

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Hong Kong’s financial secretary, Paul Chan Mo-po, is expected to deliver the government’s 2020/2021 budget on Wednesday. The market is bracing for the special administrative region’s highest ever deficit.

Chan said on Sunday in his blog that the budget was finalised after much difficulty, and that supporting enterprises and keeping employments are the key objectives for Hong Kong. This is so it can survive the current “economic winter” it is in after the US-China trade war, the social unrest in the city, and the latest Covid-19 epidemic.

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Hang Seng Indexes Co completed a review of its indices for the last quarter of 2019. Effective from March 9, the changes include the addition of China Conch Venture Holdings and Sunny Optical Technology (Group) Co to its Hang Seng China Enterprises Index. People's Insurance Co (Group) of China and CRRC Corp, meanwhile, were removed from the list of 50 securities. The same changes will be applied to the Hang Seng China Enterprise Smart Index.

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FTSE published the results of the semi-annual review of the Global Equity Index Series (GEIS) China Regional Index on Friday evening Beijing time. As expected, the inclusion factor for Chinese A-shares will be increased to 25% from 15%. 

The change will take effect on March 23 before the market opens.
By Addison Gong, Rebecca Feng
24 Feb 2020