2020-04-04 IFR Asia

18 International Financing Review Asia April 4 2020

People

&Markets

NAFMII to expedite debt sales

China’s interbank market regulator plans

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allow more companies to simplify their

bond sales procedures, three people with

knowledge of the matter told Reuters.

The move comes as the interbank market

faces increasing competition from the stock

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as Beijing broadens funding channels for

companies struggling in a virus-hit economy.

The National Association of Financial

Market Institutional Investors plans to

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and medium-term notes, allowing more

companies to issue debt with a maturity of

less than 12 months, the people said.

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rules that require outstanding liabilities of

issuers of such debt to be lower than 40% of

the company’s net assets.

The move comes after a new securities

law, which came into effect on March 1,

allowed companies to sell bonds with a

maturity of less than 12 months on the

STOCKûEXCHANGEûPOTENTIALLYûCOMPETINGûWITHû

the interbank market in this segment.

The rule changes, “whether it’s about

competition, or about helping to blunt the

impact of the virus, are not bad for the

market,” said a source.

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number of companies it considers to be of

“quality”, as such companies enjoy a more

streamlined process in bond sales. The

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increased to about 300 from 110 currently,

a source said.

China has been facilitating debt

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disruptions to business and threatens to hit

#HINESEûEXPORTSûHARD

NAFMII did not immediately respond to

requests for comment.

XIANGMING HOU, RYAN WOO

IN BRIEF

People’s Bank of China

Further repo rate cut

China’s central bank has cut its seven-day

reverse repo rate, the main rate at which it

provides short-term liquidity to the country’s

banks, by the most in five years.

The People’s Bank of China said in a statement

on its website last Monday that it had lowered

the rate by 20bp to 2.20% without giving a

reason for its move.

The third cut to the seven-day rate since

November comes only a few days after the G

pledged to inject over US$5trn into the global

economy amid the coronavirus pandemic.

China has so far been wary of relaxing monetary

policy too much for fear of triggering a “flood-

like” stimulus. It is still grappling with the

massive build-up of bad debt following its last

major stimulus during the global financial crisis.

Last month, the PBoC kept its benchmark

one-year loan prime rate unchanged at 4.05%,

meaning that the LPR is still only 10bp lower

than it was in December following a small cut in

February. The LPR is the reference rate against

which all new loans and outstanding floating-

rate ones are priced.

“This will take some pressure off the banks,

which have so far been forced to bear the brunt

of the cost of propping up struggling firms via

preferential loans,” said Julian Evans-Pritchard,

senior China economist at Capital Economics,

in a note in response to the cut in the seven-day

repo rate.

“But a lot more easing will be needed, especially

on the fiscal front, to help the economy return to

its pre-virus trend.”

Reserve Bank of India

New window for foreign bond investors

India’s central bank has scrapped investment

limits for foreign investors in a host of

government securities, paving the way for the

inclusion of Indian government debt in global

bond indexes.

The Reserve Bank of India announced last

Monday a new window, called the ‘Fully

Accessible Route’, for foreign investors to

purchase some of the country’s most liquid

securities without any investment limits.

The securities included comprise all new five-

year, 10-year and 30-year issuances in fiscal

year 2020/21 as well as the five outstanding

government securities with tenors of five, 10

and 30 years. The outstanding amount of these

bonds is Rs4.34trn (US$57.1bn).

HSBC analysts said that the changes should

pave the way for the inclusion of Indian

government debt in the Bloomberg Barclays

Global Aggregate index and JP Morgan’s

benchmark emerging markets index since

accessibility is one of the main criteria the index

publishers look at.

HSBC said that it expects an announcement

on inclusion could occur over the next 12-

months, although it noted the longer lead time

before bonds are typically added to an index.

In the case of China, for example, Bloomberg

announced in March 2018 plans to include

Chinese government debt in its major indexes.

It began adding debt in April 2019 with

inclusion being phased in over a 20-month

period.

HSBC noted that China had additional hurdles

over its settlement procedures and foreign

exchange hedging. It said these were likely

to be less of a concern for India, although the

country’s bond markets are facing some liquidity

constraints following the coronavirus outbreak

and secondary market trading volumes is one

criterion that index providers look at.

Hong Kong SFC

Traders can work from overseas

Hong Kong’s markets regulator has given

its approval for licensed traders and asset

managers to work from overseas if necessary

because of travel restrictions or other

practical problems caused by the coronavirus

pandemic.

Financial regulators around the world have had

to waive normal rules, such as allowing traders

to work from home, because of the virus.

People licensed by Hong Kong’s Securities and

Futures Commission to carry out activities such

as securities trading or giving investment advice

in Hong Kong would normally be expected to be

in Hong Kong when doing so.

However, with flight cancellations worldwide

and many countries imposing travel restrictions

or lockdowns to limit the spread of the virus,

many institutions have been left with key

personnel stranded.

Some financial professionals in Hong Kong left

the city in late January or February, often with

The move comes after a new

securities law, which came

into effect on March 1, allowed

companies to sell bonds with a

maturity of less than 12 months

on the stock exchange.

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