Business

Though the regulators are talking about the success of the new listing norms, marketmen are of the view that there are still some grey areas in the mechanism that need to be addressed.

“By reviewing the several new shares issued after the A share market resumed initial public offerings, we believe that we are approaching the initial targets. Several indicators have shown the improvement brought about by the reforms,” a senior official with the China Securities Regulatory Committee (CSRC) said in an internal meeting.

The CSRC has set three main targets for the new listing norms viz. giving individual investors more rights to subscribe new shares, freeing up capital for subscription and shrinking the price gap between primary market and secondary market.

So far, three companies have finished new shares issuance. According to China Securities Depository and Clearing Corp, about 98 percent of the new shares for on-line subscription have been allotted to individual investors, three times the ratio before the reforms.

In 2008, for the 71 new shares listed on the small- and medium-sized enterprise (SME) board in Shenzhen, only an average of 29.48 percent of individual subscribers received allotments.

But industry experts feel that some institutional investors are taking advantage of the new allotment system by masquerading as personal investors in their IPO applications.

“Since each account has a limit for subscription, some institutional investors might have used borrowed ID cards to open personal accounts with brokerages.

“Stockbrokers keen on earning commission fees usually turn a blind eye to such irregularities,” said Lu Junlong, analyst, China Finance Online.

China Merchants Bank plans to nearly double its high-end private banking network in China this year on the back of country’s recovering economic growth.

The Shenzhen-based bank plans to open seven centers for rich clients in the second half this year, boosting its total private banking network to 15 in China, said Liu Jianjun, retail banking general manager of the bank.

The bank, the country’s sixth-biggest lender, started its private banking business in August 2007, targeting clients with assets of more than 10 million yuan (US$1.46 million).

The Shanghai-listed lender is the second Chinese bank to venture into private banking to service the country’s increasing super-rich.

China is forecast to have 320,000 people on the mainland with investable assets of more than 10 million yuan by the end of this year, 6 percent more than a year ago, said a report issued by China Merchants Bank and Bain

The China Securities Regulatory Commission (CSRC) granted approval to China International Travel Service Corporation Limited for an initial public offering (IPO) on the Shanghai Stock Exchange, the securities regulator said Monday.

The company will sell up to 220 million shares to raise about 1.7 billion yuan (US$248.9 million) for expansion of travel network and duty free shops, according to its prospectus.

Net profits of the company in 2008 totaled 221.23 million yuan, compared with net profits of 217 million yuan in 2007.

Before the IPO, the China International Travel Service Group, the parent company, held 84.62 percent-stake and the Shenzhen Overseas Chinese Town Holding Co. took the other 15.38 percent.

After the IPO, the China International Travel Service Group will hold at least 61.35 percent of the listing vehicle.

(Xinhua News Agency July 21, 2009)

ICBC Credit Suisse Asset Management Co yesterday issued an exchange-traded fund of centrally administered state-owned enterprises on anticipation of strong profitability and mergers.

The ETF, which enables investors to buy or sell shares in an entire benchmark portfolio, tracks an index constituted by 50 central SOEs listed on the Shanghai Stock Exchange.

“The 50 central SOEs are key companies that influence the country’s economy, and they have recovered ahead of other companies backed by the government’s 4-trillion-yuan (US$585 billion) stimulus package,” said fund manager Hu Wenbiao.

“Besides, potential mergers of SOEs will generate investment chances and good returns for investors,” Hu said.

The State-owned Assets Supervision and Administration Commission set next year as the deadline for mergers and restructure of central SOEs.

A total of 155 SOEs have been merged into 136 companies so far, and that number should drop to about 80 to 100 companies by next year.

The SSE State-owned Enterprises 50 Index has gained 64.2 percent so far this year.

“The timely introduction of SSE Central State-owned Enterprises ETF provides investors with an opportunity to share the income of the high quality blue chips in a more easy and transparent way,” said Liu Xiaodong, vice general manager of the Shanghai bourse.

“ETFs are among the most successful products across the world as they realized large sum of net capital inflow even in the international financial crisis last year when global asset depreciated sharply,” Liu said.

Only five ETFs, with a total asset of 23.2 billion yuan, had been issued on the Chinese mainland by the end of last year.

(Shanghai Daily July 21, 2009)

China Investment Corp (CIC), China’s US$200-billion sovereign wealth fund, has agreed to invest HK$2 billion for a 40-percent stake in private equity fund manager CITIC Capital, Reuters and Caijing magazine reported, citing unnamed sources.

CITIC Capital, backed by the powerful CITIC Group, which is directly led by the country’s cabinet, will issue new shares only to CIC, and the deal could help the fund manager boost its capital base to HK$5 billion from the current HK$3 billion, said the sources with direct knowledge of the matter.

“It will give CIC a very influential role in the fund to decide what to buy and what not to buy in the future,” Xie Lijin, a lawyer specialized in private equity funds at Beijing-based Deheng Law offices, told China Daily.

“Plus, by investing in a fund of funds, this may be another way in the post-Rio world for China to make big block investments overseas in resources companies.”

Steel-to-property conglomerate CITIC Pacific and CITIC International Financial Holdings Ltd, which are CITIC Group arms, each now hold 50 percent of CITIC Capital.

After CIC’s investment, the shareholding of CITIC Pacific and CITIC International Financial, will drop to 30 percent each as they have decided not to subscribe to the new shares of CITIC Capital, Reuters said.

CIC will appoint new directors on CITIC Capital’s board, according to the sources.

“This means CIC, as the biggest of the three limited partners, could have more power in deciding what to buy compared to the many former deals it invested in before,” Xie told China Daily.

The deal is in sharp contrast to CIC’s recent US$1.5-billion investment in Canadian miner Teck Resources, in which CIC signed a highly restrictive agreement and was widely perceived as being only a financial investor in the firm.

CIC gets no representation on Teck’s board despite buying an economic interest of 17 percent in the company. The shares it is buying are vote-restricted B shares.

On the other hand, the investment in CITIC Capital, a fund of funds, is being seen as a move by CIC to employ overseas talent in managing its huge portfolio.

“As a young sovereign fund, CIC still lacks professional investment management skills. CITIC Capital, as a mature overseas private equity fund, will certainly supplement CIC’s shortage in human resources,” Xie said.

“CIC needs to be more commercial and professional in overseas investment deals.”

Many institutional investors, also known as “limited partners”, of CITIC Capital’s China-focused buyout and real estate funds, welcomed the deal, said the sources. CIC could help CITIC Capital do domestic deals more easily in future, they added.

The sources, who declined to be identified before an official announcement was made, said the deal was expected to be announced this week or the next.

Both CIC and CITIC Capital declined to comment.

(China Daily July 21, 2009)

Chinese insurers, which cumulatively have some 1.1 trillion yuan on hand to invest this year, face a big dilemma in choosing where to park that money during the second half of 2009, the industry regulator said yesterday.

“There will be around 1.1 trillion yuan, or 30 percent of existing assets, available for investment this year, putting insurers under huge investment pressure,” said Wu Dingfu, chairman of the China Insurance Regulatory Commission (CIRC).

Since the returns on bonds may continue to decrease in the following months, insurers may increase their investments in the stock market, in infrastructure projects and in the property sector during the second half, industry insiders said.

“We are planning to invest more in stocks once the market undergoes some corrections,” a manager at the Taikang Asset Management Co Ltd told China Daily.

As of the end of June, Chinese insurers had increased their investments by 10.4 percent from the beginning of this year. Bonds accounted for 50.2 percent, down 7.7 percentage points, and bank deposits 31 percent, up 4.5 percentage points, the CIRC said yesterday.

Among the investment portfolio, the proportion of stocks increased 1.9 percentage points to 9.8 percent, while mutual funds accounted for 6.8 percent, up 1.4 percentage points. The combined ceiling for these two types of investment is 20 percent.

China’s insurance premium income hit 598.61 billion yuan (US$87.64 billion) in the first half, up 6.6 percent over the same period last year, said Wu Dingfu, chairman of the China Insurance Regulatory Commission, on Monday.

Profits of the country’s insurers nationwide was about 26.1 billion yuan in the first half, up 98 percent, Wu said at a national insurance regulation working conference in Beijing.

China’s insurance premium income hit 598.61 billion yuan (US$87.64 billion) in the first half, up 6.6 percent over the same period last year.

The premium income figure is more than 1 billion yuan higher than the 597.55 billion yuan premium figure announced by the commission last week.

“The previous figure was an initial assessment, and the figure released today is accurate,” said Cai Jipu, head of the commission’s information office.

Property insurance premium revenues rose 16.4 percent year on year to 151.18 billion yuan; life insurance premium income was 447.43 billion yuan, up 3.6 percent.

Total assets of the country’s insurance companies stood at 3.7 trillion yuan by the end of June, an increase of 10.9 percent from the beginning of the year.

“Although world financial crisis had some negative effect on the insurance industry, this sector is still stable and sound as a whole,” Wu said.

The government’s efforts to boost infrastructure construction provided more channels or opportunities for insurance companies to invest insurance funds, he added.

Income from insurance investment funds totaled 109.97 billion yuan in the first half, an increase of 69.5 percent over the same period last year.

To cope with the world economic downturn, China’s government unveiled a 4-trillion-yuan stimulus packages in November, which laid out infrastructure projects in the transport, communications and energy sectors.

Wu also underscored the importance of avoiding risks, asking government departments and insurers to further improve supervision and to better manage the use of insurance funds.

(Xinhua News Agency July 20, 2009)

Shanghai’s banking regulator yesterday emphasized the importance of the 40 percent down-payment rule for second homes in a bid to prevent real estate speculation.

Also over the weekend, the Shanghai Housing Guarantee and Administration Bureau said it has ordered real estate developers to register their sales plans with the local industry watchdog to prevent them holding the properties for higher profits.

Banks in Shanghai must strictly comply with the down-payment requirement on second homes, the Shanghai Bureau of the China Banking Regulatory Commission said.

“Banks are banned from bypassing the rules under the excuse that they can’t get clients’ credit records due to lack of access to the central bank’s individual credit database,” the local banking regulator said.

The regulator also highlighted irregular practices such as banks claiming credit records couldn’t be obtained because it was hard to investigate applicants’ property deals outside Shanghai.

Banks also can’t use their own definition of what constitutes a second home, the regulator said.

In 2007, the authorities asked banks to take at least 40-percent down payment with an interest rate at least 10 percent higher than the benchmark rate on second homes to drive out speculation in the then red-hot real estate market.

However, when the market lost steam from the second half of last year, many banks ignored the rule on interest rates and some even ignored the down-payment requirements.

The Shanghai branch of the Bank of Communication sticks to the down-payment requirement but offers clients a discount on interest rates, according to an unnamed credit officer.

“In principle, we offer a 25 percent discount on the interest on second homes while applicants can even get a 30 percent discount, the highest discount, if they apply for a credit card,” the officer said. “We were told of the notice last week and we are still awaiting superiors’ order.”

The loose credit practices, together with policies to boost a healthy real estate industry issued last year against the fallout from the global financial crisis, have fuelled property transactions in Shanghai and other major cities.

New-home sales in Shanghai, excluding those related to urban redevelopment, jumped nearly 70 percent to 8.7 million square meters during the first half of this year. That compares with 8.9 million square meters sold in the whole of 2008, according to Shanghai Uwin Real Estate Information Services Co.

In the existing-home market, meanwhile, 138,400 units were sold, an increase of 9.3 percent compared with last year’s total, according to Century 21 China Real Estate research.

The average price of new properties rose to 13,918 yuan (US$2,038) per square meter between January and June in the city, up 2.8 percent compared with the average price last year.

And existing properties were sold at 11,793 yuan per square meter during the same period, up 9.1 percent from last year’s average, Liu Haisheng, director of the Shanghai Housing Guarantee and Administration Bureau, told a municipal conference on Friday.

The bureau’s new policy, effective from July 1, is designed to prohibit real estate developers from holding their properties for higher profits.

During market booms, some developers would deliberately slow their sales process to reap more profit as prices continued to rise.

The bureau said it would require developers to launch property sales under certain timelines or their credit record might be affected.

(Shanghai Daily July 20, 2009)

China Pacific Insurance (Group) Co., Ltd. (CPIC) said it planned to restart its H-share issue in a statement released Friday.

According to a statement on the website of Shanghai Stock Exchange, the company has decided to float no more than 1 billion shares on the Hong Kong market.

The company’s stock price on mainland’s Shanghai bourse has gained 3.7 percent to 28.92 yuan (US$4.25) at the moment.

(Xinhua News Agency July 17, 2009)

The Industrial and Commercial Bank of China, the world’s largest bank by market value, said it offered 110 billion yuan (US$16.1 billion) in new loans to help finance trade, at a time when its Western peers shied away from such lending because of the global financial crisis.

The bank’s outstanding loans used to fund flows of exports and imports reached 365.7 billion yuan at the end of June, up 42.7 percent from the level at the start of this year, it said in a statement yesterday.

The World Trade Organization has forecast a 10 percent fall in global trade volume in 2009, partly because of a big drop in the availability of financing to back trade.

To help fill the gap, China has relaxed rules to make it easier for banks to grant loans in support of goods shipments in and out of the country.

ICBC said its ratio of bad loans for trade finance stood at 0.2 percent at the end of June, lower than its overall non-performing loan ratio.

(Shanghai Daily July 17, 2009)