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The week in review: China keeps MLF rate unchanged, PBoC to sell renminbi bills in HK, nine infra Reits get greenlight

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By Addison Gong
17 May 2021

In this round-up, the People’s Bank of China leaves the one year medium-term lending facility rate unchanged for over a year, it plans Rmb25bn ($3.9bn) of bill issuance in Hong Kong, and the Shanghai and Shenzhen bourses approve China’s first public infrastructure real estate investment trusts since the pilot programme’s launch last April.

On Monday, the People’s Bank of China (PBoC) injected Rmb10bn of one year medium-term lending facility (MLF) loans into the banking system, keeping the interest rate unchanged at 2.95% for the 13th consecutive month. The same amount of MLF loans became due on Monday.

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The PBoC plans to sell Rmb25bn of central bank bills in Hong Kong on Friday, according to a Monday morning announcement. The deal will be split between Rmb10bn of three month bills, and Rmb15bn of one year bills.

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There were Rmb1.69m new investors in the onshore market in April, latest data from the China Securities Depository and Clearing Corp showed. The number of new investors increased 3.1% year-on-year but declined 31.7% on a monthly basis.

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The China Securities Regulatory Commission (CSRC) is taking public feedback for rules on equity transactions from companies in the ‘selection tier’ of China’s over-the-counter National Equities Exchange and Quotations (NEEQ), also known as the New Third Board.

Companies that belong to the New Third Board’s ‘selection tier’ typically have a longer operating history, larger market capitalisation and better profitability compared to those in the ‘innovation tier’ and ‘base tier’. They can also potentially transfer their listings to Shanghai’s Star market or the ChiNext board in Shenzhen if they meet certain criteria.

The new CSRC rules require the size of any share issuance from a selection tier company to be capped at 30% of their total share capital, although M&A-related transactions and rights issues are exempt from the requirement. The number of shares sold in a rights issue should not exceed 50% of the total shares before the rights issue. The CSRC also set a six to 12 month lock-up period for different investors.

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The NEEQ published a list of 275 ‘base tier’ companies that could receive a potential upgrade to the ‘innovation tier’. The number of ‘innovation tier’ companies will be boosted by about 1,292. Companies pending an upgrade are from industries including technology, services and advance manufacturing. On average, they have reported a 23.4% annual increase in revenue last year to Rmb285m and a 57.7% jump in net profit to Rmb23.9m.

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The Shanghai Stock Exchange said it has taken disciplinary action against 329 listed companies and 1,134 related personnel — including companies’ directors and members of the senior management — since 2019. Less than 20% of the cases involved serious matters such as financial fraud, fund occupation, illegal guarantees and internal control deficiencies, according to the bourse.

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The stock exchanges in Shanghai and Shenzhen have waved through plans for nine infrastructure real estate investment trusts (Reits). China launched its pilot public Reits programme about a year ago. The infrastructure projects to be funded include waste and bioenergy, toll roads, industrial parks and warehouses, in Beijing, Shanghai, Guangzhou and Shenzhen as well as the provinces of Jiangsu and Zhejiang.

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The National Development and Reform Commission has approved the establishment of a trading centre for green technology in the Zhejiang province. 

By Addison Gong
17 May 2021