Upfront
OPINION INTERNATIONAL FINANCING REVIEW ASIALevelling the field
I
t has been a long time coming, but global banks are
lNALLYûGETTINGûSOMEûMEANINGFULûACCESSûTOû#HINAgSû
SECURITIESûINDUSTRYû
4HEûDRAFTûRULESûFROMûTHEû#HINAû3ECURITIESû2EGULATORYû
#OMMISSIONûCONlRMûAûSHIFTûINûPOLICYûlRSTûANNOUNCEDû
LASTû.OVEMBERû&OREIGNûBANKSûWILLûBEûALLOWEDûTOûHOLDûAû
CONTROLLINGûSTAKEûINûAûSECURITIESûVENTURE ûWILLûHAVEûACCESSû
to the same licences as their domestic rivals, and need not
PARTNERûWITHûANûEXISTINGûBROKERû
0OINTEDLY ûTHEûRULESûDOûNOTûSTIPULATEûAûMAXIMUMû
SHAREHOLDING ûONLYûTHATûITûMUSTûBEûINûLINEûWITHûEXISTINGû
REGULATIONSû4HATûISûCURRENTLYû ûBUTûTHEûWAYûNOWûSEEMSû
clear for foreign investors to take a higher stake in the
FUTUREûWITHOUTûANOTHERûROUNDûOFûRULEûCHANGESû
4HEûRULESûALSOûENCOURAGEûFOREIGNûSHAREHOLDERSûnûWHICHû
MUSTûBEûTOP
TIERûlNANCIALûINSTITUTIONSûnûTOûCARRYûOUTûTHEIRûGLOBALûRANGEûOFûBUSINESSESûONSHOREû4HATûISûAûCLEARûINDICATIONû
THATû#HINAûISûLOOKINGûTOûBENElTûFROMûGLOBALûEXPERTISEûASûITSû
CAPITALûMARKETSûDEVELOPû
!ûûSTAKEûnûWITHûTHEûPOTENTIALûFORûMOREûINûTHEû
FUTUREûnûISûAûGAME
CHANGERûFORûGLOBALûPLAYERSû)TûALLOWSû
an international investment bank to control the culture,
COMPLIANCEûANDûSYSTEMSûOFûITSû#HINESEûVENTURE ûRATHERûTHANû
TACKINGûITSûNAMEûONûTOûANûESTABLISHEDûBROKERAGEû
)NûTODAYgSûWORLDûOFûINCREASINGLYûGLOBALûREGULATION ûTHATûISûAû
MUCHûMOREûATTRACTIVEûPROPOSITIONûTOûAû*0û-ORGANûORûANû2"3û
THANûTHEûPARTNERSHIPSûTHEYûWALKEDûAWAYûFROMûOVERûTHEûPASTû
ûMONTHSû
3TRIKINGûTHEûRIGHTûDEALûWILLûNOTûBEûEASY ûOFûCOURSEû%XISTINGû
#HINESEûPARTNERSûHAVEûNOûINCENTIVEûTOûMAKEûITûEASYûFORû
THEIRûFOREIGNûRIVALS ûANDûWILLûCHARGEûAûHIGHûPRICEûTOûGIVEûUPû
CONTROLû"UILDINGûAûNEWûVENTURE ûALTERNATIVELY ûWILLûTAKEû
TIMEû
"UTûTHEREûISûNOûDOUBTûTHATû#HINAgSûMARKETSûAREûOPENINGû
UP ûANDûTHEûREWARDSûONûOFFERûFROMûEVENûAûMARGINALûSHAREûOFûTHISûVASTûINDUSTRYûAREûSIMPLYûTOOûGREATûTOûIGNOREû
4HEû#32#ûWILLûFORMALISEûITSûRULESûAûCOUPLEûOFûMONTHSûAFTERû
AûCONSULTATIONûPERIODûENDSûONû!PRILûû%XPECTûAûNEWûROUNDû
OFûINVESTMENTSûASûSOONûASûTHEûINKûISûDRYûCredit where it's due
2
umblings of discontent are spreading through
!SIAgSûCREDITûMARKETSû2ATHERûTHANûCAUSEûFORûALARM û
HOWEVER ûRECENTûHICCUPSûAREûAûWELCOMEûREMINDERû
THATûNOTûALLûCREDITSûAREûCREATEDûEQUALû
4HEûlRSTûHALFûOFû-ARCHûHASûNOTûBEENûANûEASYûTIMEûFORû
!SIANûCREDITû4HREEûNEWûISSUESûHAVEûBEENûPULLEDûTHISûMONTHû
alone, and most of the deals that made it through are
UNDERWATERû)NVESTORSûAREûHOLDINGûlREû
"UTûAPARTûFROMûTHEûDISMALûPERFORMANCE ûITgSûHARDûTOûSEEû
WHATgSûCHANGEDûFROMûûMONTHSûAGOû
!SIAgSûFUNDAMENTALSûREMAINûSTRONG ûWITHû#HINAgSûECONOMYû
LOOKINGûSOLIDûANDûGROWTHûPICKINGûUPûACROSSûTHEûDEVELOPEDû
WORLDû$EFAULTûRATESûAREûLOW ûWITHû-OODYgSûPREDICTINGûLESSû
THANûûOFûTHEû!SIANûHIGH
YIELDûCORPORATEûISSUERSûITûRATESûWILLû
RUNûINTOûTROUBLEûINûû
%VENûLONG
TERMû53ûRATESûAREûNOTûTOOûDIFFERENTûTODAYûTHANû
THEYûWEREûûMONTHSûAGO ûWITHûTHEû
YEARû4REASURYûNOWûATû
ûVERSUSûûAûYEARûEARLIERûnûEVENûIFûTHEûSWINGûSINCEû
THEûSTARTûOFûTHEûYEARûHASûBEENûDRAMATICû
#REDITûSPREADSûAREûMOREûSQUEEZEDûTHANûTHEYûWEREûINûEARLYû
ûBUTûNOTûYETûONûAûHISTORICûBASISû4HEû*0û-ORGANû!SIAû
#REDITû)NDEXûIMPLIESûANûAVERAGEû:
SPREADûOFûBP ûSTILLûWIDEû
OFûTHEûBPûRECORDûINûû
)NVESTORS ûHOWEVER ûAREûCLEARLYûNERVOUSû&EDûHIKES ûTRADEû
WARSûANDûANûINCREASINGLYûUNPREDICTABLEû53ûDOLLARûTHREATENû
TOûDERAILûGLOBALûRISKûAPPETITEûATûAûMOMENTgSûNOTICE ûANDû
#HINAgSûPOLITICIANSûHOLDûTHEûKEYûTOûCAPITALûmOWSûTHATûAREû
BECOMINGûEVERûMOREûIMPORTANTûTOûTHEûGLOBALûMARKETSû
3OONERûORûLATERûINVESTORSûWILLûNEEDûTOûPUTûTHEIRûCASHûTOû
WORK ûANDûTHEYûWILLûBEûMOREûCAREFULûWHENûTHEYûDOû.OBODYû
WANTSûTOûPICKûANûUNDERPERFORMER ûANDûBUYERSûNOWûKNOWû
THEYûNEEDûTOûCHOOSEûTHEIRûSPOTSûCAREFULLYû
4HATûMEANSûGREATERûDIFFERENTIATIONûBETWEENûCREDITS û
ANDûAûMUCHûWIDERûRANGEûOFûCOUPONSûTHANû!SIANûISSUERSû
HAVEûBEENûUSEDûTOûINûRECENTûYEARSû)NûTHEûPROCESS ûTHEû
credit markets can get back to their core role of allocating
CAPITALûEFlCIENTLY ûANDûULTIMATELYûMAKINGûECONOMIESûMOREû
PRODUCTIVE
7HILEûTHATûADJUSTMENTûISûGOINGûON ûITgSûCLEARûTHATûISSUERSû
ANDûINVESTORSûAREûGOINGûTOûHAVEûTOûWORKûHARDERûFORûTHEIRû
MONEYûINû!ûûSTAKEûALLOWSûANû
international investment
bank to control the culture,
COMPLIANCEûANDûSYSTEMSûOFûITSû
#HINESEûVENTURE