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The week in review: Ant gets approval for Star IPO, central bank keeps LPR steady, Guolian Securities finds boost from Sinolink acquisition

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By Addison Gong
21 Sep 2020

In this round-up, Ant Group receives blessing for the Mainland portion of its jumbo dual listing, the September benchmark lending rate remains unchanged, and a large securities house is in the making as Guolian Securities plans to acquire a bigger rival.

Ant Group received the greenlight from the listing committee of the Shanghai Stock Exchange's Star board last Friday for the Mainland portion of its planned $30bn A+H listing.

The Alibaba Group Holding-owned company plans to float no less than 10% of its total share capital through the dual listing in Shanghai and Hong Kong. It is aiming for a post-listing valuation of between $200bn and $300bn. The H-share listing is still pending approval from the Hong Kong Exchanges and Clearing.

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China has decided to keep its benchmark lending rate, the loan prime rate (LPR), stable for the fifth consecutive month in September. On Monday, the People’s Bank of China (PBoC) announced the one year LPR at 3.85%, and the five year and above rate at 4.65%.

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The foreign exchange settlement deficit for Chinese banks widened from July’s Rmb17.7bn to Rmb26.5bn in August, or $3.8bn in dollar terms, according to the State Administration of Foreign Exchange (Safe). Specifically, forex settlements stood at Rmb1.106tr and forex sales at Rmb1.133tr.

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The PBoC, Safe and four other regulators are taking feedback for a plan to improve the cross border use of renminbi to help stabilise foreign trade and investment.

The proposed measures include simpler renminbi settlement procedures for both corporations and individuals, and easing some restrictions, such as allowing reinvestment in renminbi, by foreign-related companies.

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Guolian Securities plans to acquire its rival Sinolink Securities, the two firms announced on Sunday. The deal consists of an equity swap where Guolian will issue A-shares to all Sinolink shareholders. Meanwhile, Guolian plans to purchase a 7.82% stake in Sinolink from its controlling shareholder Yongjin Group.

The total asset of the combined entity will exceed Rmb100bn, making it one of the top 20 largest securities houses in China. For the first half of 2020, Guolian reported a revenue of Rmb822m, and Sinolink Rmb2.9bn.

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Industrial and Commercial Bank of China (ICBC) and Citic Group signed a strategic co-operation agreement. The two firms plan to work together in areas including corporate financing, investment banking, asset management and fintech.

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The Ministry of Commerce (Mofcom) has announced regulations regarding its ‘unreliable entity list’ targeting foreign companies. While the list is yet to be published, the Mofcom said that decisions will be based on considerations including damages on China’s sovereignty, safety and development.

Firms that end up on the list will be banned from import and export activities as well as investing in China. Individuals related to the companies will not be able to enter the Mainland or obtain visas. Fines and other necessary measures could also be imposed.

In a Q&A, the ministry said the rules are not targeted at any specific countries or companies.

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The CSRC revised rules first published in 2009 for listed securities firms, incorporating changes related to China’s new securities law implemented on March 1 this year.

The regulator requires listed securities companies to strengthen their internal control, and scrapped the requirement to publish monthly operational data.

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The PBoC will establish a mechanism to promote green finance, said Chen Yulu, deputy governor at the central bank, at a China green forum on Saturday. It plans to guide financial institutions to better recognise, analyse and manage climate and environmental risks, and strengthen international co-operation in the green field, according to Chen.

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The CSRC held a press conference last Friday. Its spokesperson, Chang Depeng, said the regulator launched 43 investigations into information disclosure-related violations between January and August. He also said the CSRC has established a team made up of senior management to work on the regulatory framework for class action lawsuits.

Regarding the Star board, Chang said 174 listed companies reported a total of Rmb83.1bn of revenues for the first six months of 2020. Their net profits attributable to the parent companies’ shareholders reached Rmb10.5bn, after a 27% year-on-year growth.

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The US Department of Commerce on Friday last week announced a ban in transactions related to Tencent’s WeChat and popular short-video platform TikTok, following president Donald Trump’s executive orders last month. The prohibitions include the downloading or updating of WeChat or TikTok mobile applications in US online app stores, as well as the use of WeChat to transfer funds or process payments in the country.

The new restrictions were expected to be effective from Sunday, but a US judge in San Francisco issued an order earlier that day blocking the government from requiring Apple and Google to remove WeChat for downloads. Also, according to Reuters, Tencent is rebranding the WeChat Work office collaboration app to WeCom to avoid a US ban.

For the TikTok ban, the Commerce Department announced a one-week delay on Saturday. The move came as Trump approved a deal between TikTok's parent, ByteDance, and Oracle Corp for the purchase of TikTok’s US operations. The transaction will also involve retail giant Walmart, Trump told reporters. 

The Chinese Mofcom said China “strongly opposes” the US’s move to restrict the two apps. It plans to do what is necessary to protect the legal rights of Mainland companies should the Trump administration move ahead with the ban.

By Addison Gong
21 Sep 2020