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The week in review: China keeps June LPR steady, Nafmii targets two bond underwriters

China Beijing_adobe_575px_30Mar21
By Addison Gong
21 Jun 2021

In this round-up, the Chinese central bank leaves the benchmark lending rate stable for the 14th consecutive month in June, and the interbank bond regulator issues a warning to an onshore bank and accuses another of allegedly breaking underwriting rules.

The one year loan prime rate (LPR) remained unchanged in June at 3.85%, the People’s Bank of China (PBoC) said on Monday morning. The five year and above rate was kept at 4.65%.

The last time the LPR, China’s benchmark lending rate, was lowered was in April 2020, when the one year rate was cut by 20bp, and the five year and above rate by 10bp.

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Chinese banks recorded a foreign exchange settlement surplus of Rmb146.8bn in May, or $22.8bn in dollar terms, according to the State Administration of Foreign Exchange (Safe).

Last month, there was stable cross-border flow of capital for securities investment, said the Safe’s deputy head and spokesperson Wang Chunying. Foreign investors increased their holding of onshore bonds and stocks by $23.7bn, while domestic accounts made a net purchase of Rmb36.6bn of H-shares under the Stock Connect scheme, said Wang.

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The China Securities Regulatory Commission (CSRC) has finalised the revised rules on securities market bans, having taken public feedback for the changes earlier this year.

The existing regulations forbid individuals who have been engaged in violations, such as financial fraud, insider trading and market manipulation, from conducting business in the securities or securities services industry. Under the revised rules, they will also be banned from becoming directors or senior management of all securities issuers.

The CSRC also clarified that for those who are prohibited from trading listed securities, the ban will last no more than five years. It added major information disclosure related violations as one of the scenarios for a life-long ban from the securities market.

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Bestar Consultant in Beijing and Shanghai’s Realize Investment Consulting have each received approval from the CSRC to start M&A financial advisory businesses, according to the regulator.

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Zheshang Bank has received a warning from the National Association of Financial Market Institutional Investors (Nafmii) for alleged violations when acting as the lead underwriter for domestic bonds issued by Haicheng Urban Jincai Land Building Investment Co.

Among other things, Zheshang Bank allegedly failed to conduct proper due diligence on the projects funded by the bond proceeds or monitor the actual use of proceeds. It was told to fully rectify its problems. The issuer, Haicheng Urban Jincai, is banned from issuing Namfii-regulated bonds for two years, for alleged violations such as including fraudulent information in the bond prospectus.

Separately, Postal Savings Bank of China was also targeted by the regulator. It was accused of allegedly taking orders for unspecified bond deals outside of the bookbuilding hours set in the issuance documents, among other things. The bank was invited for a regulatory chat with Nafmii, and was told to conduct a full rectification of its issues.

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The PBoC plans to sell Rmb5bn of central bank bills in Hong Kong on Thursday. The bills have a six month tenor.

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Passenger vehicle sales declined 3.4% in May compared to the previous month to 1.65m vehicles, according to the China Association of Automobile Manufacturers. Production dropped 5.7% month-on-month. 

By Addison Gong
21 Jun 2021