The week in review: China finalises Star market follow-on rules, NDRC extends bond issuance approval deadline, JD Digits kicks off pre-IPO education
In this round-up, regulators release official guidelines for follow-on offerings in the Nasdaq-style Star market, issuers of onshore ‘enterprise bonds’ get an extension on their regulatory approvals, and a financial unit of JD.com starts pre-listing education for its Star debut.
The China Banking and Insurance Regulatory Commission (CBIRC) published a list of 38 shareholders of banks and insurance companies that have violated market regulations. This is the first time the CBIRC has published such a list. The move is aimed at establishing “stricter market disciplines”, the regulator said.
These shareholders were found conducting related-party transactions, fabricating business documents and using capital coming from illegal sources, among a range of other inappropriate behaviour.
The Shanghai Stock Exchange (SSE) published rules governing equity financing by Star companies following their IPOs, including through additional share placements, according to a Friday statement. The bourse first collected public opinion for the rules from November 8 to December 8 last year.
The new rules simplify the requirements for Star companies to conduct follow-on offerings, and shortens the timeline for the inquiry and registration process from the regulators. For companies seeking “fast and small amount of money”, the bourse has an accelerated registration and approval process.
The National Development and Reform Commission (NDRC) has decided to extend the deadline for approvals for the sale of so-called ‘enterprise bonds’. Enterprise bonds are corporate bonds issued in the interbank market and regulated by the NDRC.
Issuers with approvals expiring between February and June 2020 were given another 12 months to complete their bonds. Those expiring after July this year will get an extension until June 30, 2021.
The People’s Bank of China, CBIRC, China Securities Regulatory Commission (CSRC) and the State Administration of Foreign Exchange jointly issued a set of rules distinguishing standard and non-standard debt assets.
A draft had been soliciting public opinion from October to November last year.
The CBIRC said that policy bank bonds, bonds issued by China State Railway Group or Central Huijin Investment and Panda bonds are standard debt assets. In general, standard debt assets refer to fixed income securities such as bonds and asset-backed securities. Regulators have capped the investment of bank wealth management products in non-standard debt assets at 35% of the products’ net assets.
The new rules will kick into effect on August 3.
Luckin Coffee held a shareholder meeting at 3pm Beijing time on Sunday in another attempt to oust Lu Zhengyao as a director of the company and chairman of the board, together with three other directors.
Lu is said to have been removed from his positions, according to onshore media. Luckin declined to comment.
Both Citic Securities and China Securities Co (CSC) received letters from the SSE about a rumoured merger, after Bloomberg reported last week that the Communist Party committees at the two firms have approved a plan. Both Citic and CSC denied the rumour in stock exchange filings last Friday.
Citic said on Monday morning, in response to the SSE’s enquiry, that its parent, Citic Group, has not had any discussion about a plan to merge the two brokerages. CSC said that its party committee never held a meeting to approve a merger.
JD Digits, formally called JD Finance and the fintech unit of JD.com, is planning to debut on the Shanghai Star market, according to a filing with the Beijing branch of the CSRC.
The company started “pre-listing tutoring” on June 28. The “tutors”, which usually end up being the IPO sponsors, are Citic Securities, Guotai Junan Securities, Huajing Securities and Minmetals Securities, according to the filing.
“Pre-listing” tutoring is required by the CSRC for all Chinese companies planning to go public in the domestic market. Banks and securities houses are supposed to familiarise the companies with information on being listed and improve their organisational structures.
Semiconductor Manufacturing International Corp has set the price for its debut in the Star market at Rmb27.46 ($3.89) per share.
This means the company will net more than double its original IPO size target of Rmb20bn. Instead, it will raise Rmb46.3bn, or Rmb53.2bn post greenshoe. The online and offline subscription for the shares is set for Tuesday.
The CBIRC is planning to grade domestic financial leasing companies into five levels, according to a statement last Friday. Companies will be graded in terms of their capabilities in asset management, internal management, risk controls and strategic planning. The four elements take up 15%, 25%, 35% and 25% of the total score, respectively.
Financial leasing companies with higher ratings will receive regulatory perks such as more business licences and less frequent in-person regulatory checks, the CBIRC said.
China has appointed Luo Huining, director of the central government’s liaison office in Hong Kong, to be the national security adviser to the special administrative region’s newly established committee for safeguarding national security. The committee is chaired by chief executive Carrie Lam.