The week in review: Shenzhen merges mainboard with SME board, CSRC strengthens ESG disclosures, MOU sealed for Wealth Management Connect
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The week in review: Shenzhen merges mainboard with SME board, CSRC strengthens ESG disclosures, MOU sealed for Wealth Management Connect

Shenzhen_adobe_575px_8Feb21

In this round-up, China’s securities regulator approves the consolidation of the Shenzhen Stock Exchange’s main board and the SME board, listed companies are required to update investors with information related to their environmental, social and corporate governance (ESG) efforts, and Beijing, Hong Kong and Macau further lay the foundation for a cross-border wealth management connect pilot scheme.

China has revised its 2019 GDP down by Rmb435bn to Rmb98.65tr ($15.3tr), and the annual growth rate to 6% from 6.1%, the National Bureau of Statistics said last Friday.

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The country’s foreign exchange reserves dropped by $5.9bn month-on-month in January to $3.21tr, according to the State Administration of Foreign Exchange.

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The China Securities Regulatory Commission (CSRC) has approved for the merger of the mainboard of the Shenzhen Stock Exchange (SZSE) with the SME board, according to a Friday announcement.

Some 1,468 companies are listed on the two boards, making up 35% of the total A-share listed companies, with a combined Rmb23.39tr in market capitalisation. The boards share similarities, and combining the two will help the SZSE meet the funding requirements of companies that are at different development stages, the announcement said.

The combined board will run under unified regulations, with no changes to the listing conditions, investor requirements or the current trading mechanism. All companies will continue using the same stock code as well.

In a separate statement, the Shenzhen bourse said the approval-based equity financing system will remain in place for the merged board. The listing standards have not been lowered, nor will there be new channels for firms to go public, it added.

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Last Friday, the CSRC revised regulations on the registration of insider information at listed firms. The rules consolidate the companies’ key responsibilities as well as those of the stock exchanges and third party agencies, to prevent insider trading.

The regulator also published information disclosure requirements for pre-IPO firms, aimed at cracking down on illegal profit-taking by “shadow shareholders” and improving the quality of listed companies. According to the new rules, any new shareholders that came onboard a company within 12 months of its listing application will be subject to a 36-month lock-up period.

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The CSRC is taking feedback for revised guidelines for investor relations management at listed firms. Companies have been told to engage in ‘active’ investor relationship management. One of the key changes is the addition of ESG-related information to a list of issues firms should update investors about.

The revised rules include requirements for “key minorities”, including directors of the board and senior management, asking them to be more involved in dealing with investors. The CSRC and other institutions may publish evaluations and rankings of companies based on their investor relationship work.

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The State Administration of Market Regulation (Samr) has published anti-monopoly guidelines for internet platforms, having released draft rules last November.

The guidance bans behaviour such as price fixing and forcing consumers to choose one internet platform over another. Samr said the rules will put an end to monopolistic behaviour, help the “regulated, orderly, innovative and healthy development of the platform economy” and protect fair market competition.

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The total assets of the banking industry in Shanghai increased 16.4% year-on-year in 2020 to Rmb19.2tr, according to the local CBIRC. The insurance sector’s combined assets climbed 12.3% compared to a year ago, to Rmb883.2bn.

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China plans to further develop the Lingang New Area in the Shanghai Pilot Free Trade Zone. Financial institutions have been told to provide more credit support to companies headquartered in the Lingang New Area. These firms are also being encouraged to sell more bonds or securitization deals in the domestic market, as well as engage in cross-border financing activity such as offshore bond issuance and cross-border investment.

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The People’s Bank of China has approved the issuance of foreign currency negotiable certificates of deposit (NCDs), shows a Friday notice from the China Foreign Exchange Center. NCDs are short-term debt instruments that banks issue to one another in the interbank bond market. The move will broaden the funding avenues for financial institutions in foreign currencies in the onshore market, the notice said.

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The Ministry of Finance and the National Development and Reform Commission have asked local governments to report by February 21 the amount of funds they need to raise through special purpose bonds this year, local media reported.

China is expected to announce the official annual local government bond issuance quota at the March parliamentary meeting. The special purpose bond quota was Rmb3.75tr for 2020 — Rmb1.6tr higher than a year ago.

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Authorities in the Mainland, Hong Kong Special Administrative Region (SAR) and Macau SAR signed the memorandum of understanding (MOU) on the launch of the cross-border wealth management connect pilot scheme — the Wealth Management Connect — in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) on Friday.

The launch of the Wealth Management Connect, targeted at retail investors, was officially announced last June.

The People’s Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, the Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission of Hong Kong and the Monetary Authority of Macao signed the MOU last Friday.

They “aim to establish sound supervisory cooperation arrangements and liaison mechanism”, said the HKMA in a press release. “This will lay a good foundation for the smooth operation of the scheme and the protection of investors’ interest,” it added.

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HSBC is setting up a new GBA office in Guangdong. It has appointed Daniel Chan to lead the unit, effective in March, said an announcement last week. Chan is currently head of business banking, commercial banking, in Hong Kong. He will report functionally to Diana Cesar, the bank’s Hong Kong chief executive, and to Mark Wang, president and chief executive of HSBC China, on an entity basis.

The new unit will “oversee all strategy related activities in order to capture opportunities brought about by the [GBA’s] economic growth”, said HSBC.

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