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China markets round-up: MoF to tap special treasury bonds, 2020 negative lists shortened, Gome founder out of prison early

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By Addison Gong, Rebecca Feng
26 Jun 2020

In this round-up, the Ministry of Finance plans to double the size of its already issued special treasury bonds, the government removes some restrictions for foreign investment in the 2020 negative lists, and the former richest man in China and founder of Gome is released from jail after 10 years.


China’s Ministry of Finance issued the third tranche of its special Covid-19 treasury bonds on Tuesday, with the Rmb70bn 10 year deal priced at 2.77% after an auction.

It is planning to tap the new 10 year note for another Rmb70bn on June 30. The government will also double the size of the Rmb50bn five year bond and Rmb50bn seven year next week. 

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The People’s Bank of China injected Rmb500bn into the market through reverse repurchase agreements this week. These included Rmb310bn of seven-day repos at a rate of 2.2% between Monday and Wednesday, and Rmb190bn of 14-day repos at 2.35% on Monday and Tuesday.

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The Ministry of Commerce (Mofcom) and the National Development and Reform Commission have published the 2020 version of general and free trade zone negative lists.

The restricted areas for foreign investment were reduced by seven for both lists.

In the financial industry, China reaffirmed its commitment to opening up by removing foreign ownership caps for securities companies, fund managers, futures companies and life insurance firms. The restrictions had been lifted for securities and fund management companies from April 1, and for futures firms and lifers on January 1. 

It also relaxed foreign access in manufacturing and agriculture.

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In the first quarter this year, China’s current account deficit reached Rmb235.2bn, the State Administration of Foreign Exchange (Safe) said in a Wednesday statement. The country’s capital and financial account balance recorded a surplus of Rmb77.4bn.

The current account deficit continued to be in a reasonable range despite volatility in the international financial markets, said Wang Chunying, chief economist at Safe.

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Chinese domestic investors made a total of Rmb314.9bn in outbound investments in the first five months this year, a 1.3% year-on-year decrease, according to data from the Mofcom on Monday. In dollar terms, the decline is greater at 4.9%.

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Carrie Lam, chief executive of the Hong Kong Administrative Region, said the government will work to include a cross-border connect of exchange-traded funds (ETFs) into the Shenzhen-Hong Kong Stock Connect scheme. The launch date is yet to be announced. Lam was delivering an opening speech at the Caixin Summer Summit on Monday.

The so-called ETF Connect has been long in the making. The scheme was planned by Hong Kong’s Securities and Futures Commission (SFC) and the China Securities Regulatory Commission as early as 2016. But the plan was shelved in December 2018. At the time, the SFC cited technical issues.

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The Shenzhen Stock Exchange said on Wednesday that listed companies can be fined up to Rmb5m if they commit financial fraud or receive two public condemnations from the bourse.

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Huang Guangyu, founder and former chairman of Gome, an electronics retailer and a household name in China, has been released on parole after spending the last 10 years in jail, according to a court announcement and a filing from the company. 

Huang, once the richest man in China, was sentenced to 14 years imprisonment and a Rmb600m fine in 2010 for illegal business dealings, insider trading and bribery.

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Luckin Coffee said on Tuesday that it received a second notice from the Nasdaq to delist its shares, for failing to file its 2019 full year financial report. The bourse had already issued a delisting notice to Luckin after the company admitted to fabricating its sales figures.

The Chinese coffee chain put part of the blame on the delay in filing the annual report on Covid-19, saying it affected the financial statement preparation process.

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Qinghai Provincial Investment Group Co said it, together with 16 of its subsidiaries, received a court ruling to enter restructuring on June 19. This is because “it is unable to repay its matured debt obligations and lacks the ability to repay such debt obligations”, according to a Tuesday morning filing.

The announcement came just a few days after the company made public that some of its creditors had filed an application with the Xining Intermediate People's Court for the restructuring.

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Safe said this week it would begin collecting data regarding foreign financial assets and liabilities of Chinese non-financial enterprises, as well as offshore transactions done by them, according to a notice.

Domestic companies that made more than $700m in offshore payments in 2018 will be among the first batch to report their transactions to Safe starting from January next year.

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The State-owned Assets Supervision and Administration Commission of Yunnan province has asked state-owned enterprises (SOEs) in the province to refrain from adding new debt, local media reported.

Additionally, the commission also asked the SOEs to conduct swaps for all bonds with a coupon rate higher than 6.5%.

For transactions with a coupon higher than 7%, companies must do “everything possible” to swap them and make sure that they will not secure such high-cost funding again.

The notice also forbids provincial level SOEs from borrowing from each other or acting as the guarantors for one another.

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Charles Li, chief executive of the Hong Kong Exchanges and Clearing, said in a Monday webinar that 2020 will be an important year for the Hong Kong markets.

He added there will be many Chinese companies doing secondary listings in Hong Kong, providing more vitality and diversity to the market.

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The government of Maharashtra, the second-most populous state in India, has suspended three investment proposals from Chinese companies, local media reported. The total investment amount of the projects is approximately Rp50bn ($662m).

The decision followed a clash between Chinese and Indian soldiers at Galwan Valley, the Himalayan border between the two countries, on June 15.

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VTB, the only Russian bank with a full commercial banking licence in China, opened a new office in Shanghai, according to a Thursday press release.


By Addison Gong, Rebecca Feng
26 Jun 2020