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FINANCE

By Yue Yue and Zhao Runhua / May 21, 2019 05:12 PM / Finance

Shen Minggao. Photo: IC Photo

Shen Minggao. Photo: IC Photo

It’s been more than a month since the CEO of GF Holdings — the Hong Kong subsidiary of brokerage firm GF Securities — stepped down. Now, the company may finally have a new leader.

Shen Minggao, GF Securities’ chief economist, has been recommended as the subsidiary’s CEO, Shen confirmed to Caixin on Monday.

In April, after a GF Holdings hedge fund reported massive losses on foreign investments that blew a hole in the brokerage’s bottom line for 2018, the company’s former CEO Tang Xiaodong resigned, citing “personal reasons.”

Shen, 54, has served as both the head of China research and Greater China chief economist for Citigroup Global Markets Asia. He holds a doctorate in economics from Stanford University.

Many believe one of Shen’s priorities, if the CEO recommendation is accepted, would be risk management, considering both Shen’s personal background and GF Holdings’ own current situation.

Related: Brokerage Unit CEO Departs in Wake of Hedge Fund Blow-Up

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FINANCE

By Bloomberg / May 21, 2019 09:37 AM / Finance

Photo: Bloomberg

Photo: Bloomberg

A quickening tumble in Tencent Holdings is likely to aggravate this month’s slump in Hong Kong equities as the trade war intensifies in the tech sector.

Tencent has plunged 14% since last month’s high to wipe out $65 billion of value, and selling momentum in the stock is the most intense since October. After being the biggest contributor to gains on Hong Kong’s Hang Seng Index earlier this year it’s since turned into the largest drag.

Unimpressive first-quarter earnings spurred rare downgrades, with analysts now the least bullish since 2016, while the Chinese release of a Battle Royale-style shooter was met with disappointment. As the U.S. tightens the noose on Huawei Technologies, investors are bailing out of Chinese tech companies -- Alibaba Group sank the most in six months on Monday and Baidu tumbled more than 8%.

With the Hang Seng Index closing below the support level of 28,000 on Monday, souring sentiment toward such a heavyweight Tencent makes the gauge more vulnerable to further losses, especially as trade war rhetoric turns more strident.

Related: China to Launch Cross-Market Bond Index Mutual Funds

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By Peng Qinqin, Lin Jinbing and Huixia Sun / May 20, 2019 04:06 PM / Finance

Photo: IC Photo

Photo: IC Photo

The current focus of liberalization of interest rates in China is to unify two “tracks” of lending rates — one is the benchmark rates set by the central bank, while the other refers to the ones chiefly set by the market — the People’s Bank of China (PBOC) said Friday in its latest quarterly report.

This is the first time that the monetary authority has specified how it will conduct such a reform.

One of the PBOC’s major tasks this year is to advance the unification of China’s two “tracks” of interest rates this year.

Market participants say that they believe that the lending interest rates should be the first to go, because unifying two tracks of deposit interest rates may probably lead to a fiercer deposit competition among banks, in turn forcing them to raise interest rates on loans to companies, which is in contrast to government efforts to lower borrowing costs for companies amid an economic slowdown.

Related: In Depth: China Grapples With How to Let Market Steer Interest Rates

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By Wang Juanjuan and Denise Jia / May 18, 2019 05:08 AM / Finance

Photo: IC Photo

Photo: IC Photo

China’s securities regulator concluded an investigation of one of China’s largest listed drugmakers, finding the company fabricating its financial reports from 2016 to 2018.

Shanghai-listed traditional Chinese medicine supplier Kangmei Pharmaceutical Co. Ltd. used fake bank deposit slips to inflate its cash reserves, forged documents for non-existent business activities, and transferred company funds to related parties to trade in its own stock, the China Securities Regulatory Commission (CSRC) said Friday.

Kangmei’s auditor, GP Certified Public Accountants Co. Ltd., the largest auditing company in Guangdong, was also put under investigation for failure to perform due diligence.

Kangmei disclosed April 30 that it was targeted by regulators on suspicion of false financial reports involving a 29.9 billion yuan ($4.4 billion) overstatement of cash on hand.

But the company’s founder and chairman Ma Xingtian described the overstatement as an “accounting error” as results of loopholes in internal controls and financial management. After correcting the accounts, the company’s net profit in 2016 and 2017 would have been reduced by half.

Kangmei was previously involved in several bribery cases involving government officials. According to court documents released last June, the company bribed Cai Ming, former director of the drug safety supervision department at the Guangdong Province Food and Drug Administration, to the tune of 300,000 yuan from 2014 to 2015.

In February, the company was rattled by default risks on $300 million of bonds. The crisis was eased later after the Guangdong provincial government stepped in.

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By Peng Qinqin and Denise Jia / May 18, 2019 04:59 AM / Finance

Photo: VCG

Photo: VCG

The Chinese yuan broke the psychologically important 6.9 yuan per dollar level amid escalating trade conflict between the world’s two biggest economies, spurring large inflows of dollars to the onshore yuan market.

The onshore yuan closed at 6.91 per dollar, down 0.46% from Thursday’s official close, while the offshore yuan fell to 6.95 per dollar.

For the seventh trading session in a row, China’s central bank weakened the central parity rate of the Chinese yuan to 6.8859 against the dollar Friday, 171 basis points or 0.25% lower than Thursday, according to the China Foreign Exchange Trade System.

The central parity rate is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day. The central bank allows the yuan to rise or fall by as much as 2% from the central parity rate each day in the onshore spot market.

Traders noticed increasing dollar inflows to the onshore yuan market after midday. When the offshore yuan broke the 6.9 level on Monday, market participants had expected the central bank to defend the currency from weakening past the critical 7 per dollar mark.

“The central bank doesn’t want the yuan exchange rate to be driven by market sentiments,” said Xie Yaxuan, chief economist at China Merchants Securities. He said he expected a low possibility of breaking 7 under the premise that the U.S. dollar doesn’t strengthen significantly.

Related: Yuan Falls to 2019 Low on Setback in Trade Talks

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By Wu Xiaomeng and Han Wei / May 17, 2019 02:32 AM / Finance

Photo: VCG

Photo: VCG

A total of 4,170 creditors committees were set up in southwest China’s Sichuan province by the end of March to help local companies manage their debts as part of a nationwide pilot program to let creditors play greater role in the country’s deleveraging campaign.

Tong Meng, deputy director of the Sichuan branch of the China Banking and Insurance Regulatory Commission (CBIRC), said Thursday that companies installing creditors committees represent nearly half of the outstanding loans issued in the province. About two-third of the companies with such committees are private enterprises.

The top banking regulator in 2016 initiated a pilot program requiring all large, financially distressed companies to set up creditors’ committees as a way to ensure that they could sustainably manage their debts.

Yang Lei, secretary-general of the Sichuan Banking Association, said creditors committees could play a role in helping companies reduce their debt overhang, push forward business restructuring and access new funding.

Related: International Warnings Mount Over Potential Impact of China Stimulus

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By Zhao Runhua and Zhang Yu / May 15, 2019 05:54 PM / Finance

Photo: IC Photo

Photo: IC Photo

Some of the companies applying to list on China’s new high-tech board have been evading questions and fudging numbers, the Shanghai Stock Exchange said.

The exchange sent letters to 86 candidates regarding concerns including issues with their prospectuses and business models, it said Tuesday. At least 71 companies and sponsors have responded so far — and some unsavory patterns are emerging.

Some companies “intentionally” chose not to address concerns that might unveil their weaknesses, while some exaggerated real situations, the Shanghai bourse said.

The exchange also pointed out that some sponsors changed key financial figures that had already been included in published prospectuses, and several even used modified versions of the bourse’s questions.

The exchange said it had asked the companies and sponsors to correct their misconduct, without naming the offenders. It said it will keep asking questions if a candidate fails to fully disclose information.


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By Liu Jiefei and Zhang Yu / May 14, 2019 02:50 PM / Finance

Photo: VCG

Photo: VCG

Global index giant MSCI will add stocks trading on Shenzhen’s ChiNext board to its indexes for the first time, allowing foreign investors to tap the tech-focused board by investing in the indexes.

MSCI has decided to add 26 Chinese A-shares to the MSCI China A Large Cap Index, of which 18 are ChiNext stocks, according to its press release on Tuesday. In addition, the company will raise the inclusion factor of 238 existing constituents in the index from 5% to 10%, which means 10% of total market capitalization of the shares will be added to MSCI indexes.

After all the changes become effective after the market closes for the day on May 28, Chinese A-shares will have an aggregate weight of 5.25% and 1.76% in the MSCI China Index and MSCI Emerging Markets Index, respectively, according to MSCI.

The move is the first of MSCI’s three steps to increase the weighting of Chinese A-shares in its indexes this year. MSCI will increase the weighting of large-cap Chinese A-shares by raising the inclusion factor to 15% in August and to 20% in November. Additionally, the company will add mid-cap A-shares, including eligible ChiNext shares, with a 20% inclusion factor in November.

Related: MSCI to Raise Index Weighting for China Stocks

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By Zhao Runhua and Lin Jinbing / May 14, 2019 12:50 PM / Finance

Photo: VCG

Photo: VCG

China’s central bank issued 200 billion yuan ($29.1 billion) of medium-term lending facility (MLF) loans on Tuesday, the bank said in a statement. The amount is 24 billion yuan more than the combined 176 billion yuan of MLF loans and reverse repo due on the same day.

On Wednesday, the People’s Bank of China will cut its reserve requirement, the amount of cash banks must keep in reserve, for some small and midsize locally focused lenders. The move is expected to unleash 280 billion yuan of long-term funds into the market. It’s widely seen as a measure to support the economy as external uncertainties increase, especially when China-U.S. trade tensions have been escalating.

Related: Central Bank to Cut Reserve Requirement Ratio for Smaller Locally Focused Lenders


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By Yang Ge / May 14, 2019 10:46 AM / Finance

China stocks opened lower on Tuesday after a major sell-off in the U.S. sparked by escalating tensions between the world’s two largest economies. But they quickly recouped those loses as local investors shrugged off the latest developments.

The Shanghai Composite Index opened down 1.06%, while the Shenzhen index opened down a similar 1.15%, following the Monday sell-off that saw the major U.S. indexes all drop by 2.4% or more. China said late Monday it will increase tariffs on about 5,000 American products to as much as 25% starting June 1, after the U.S. took similar measures late last week. 

Despite opening down, the two main indexes quickly bounced back and moved into positive territory. About an hour into the trading day the Shanghai Composite was up about 0.14%, while Shenzhen was up about 0.4%.

Related: Yuan Falls to 2019 Low on Setback in Trade Talks
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By Zhao Runhua and Zhang Yu / May 13, 2019 05:00 PM / Finance

Photo: VCG

Photo: VCG

China will soon launch its new Nasdaq-style high-tech board, and the reviews of its first batch of potential IPOs have hit their first road-bump.

Ninebot, the maker of robots and short-distance transportation vehicles, formally requested that its review be suspended this Sunday, according to an official statement from the Shanghai Stock Exchange, without further elaboration.

In April, Ninebot decided to change preferred stocks some investors were holding to ordinary shares. The company then received documents from the regulator demanding further explanation and auditing materials for the period ending June 30. Ninebot later applied to suspend the review temporarily to allow itself more time to respond to the regulator's requirements.

Ninebot is backed by Xiaomi and Sequoia China, and has long been seen as one of the strongest candidates for a listing on the new board.

Related: China to Relax and Speed Up IPO Review Process

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By Peng Qinqin and Han Wei / May 11, 2019 02:47 AM / Finance

Photo: Bloomberg

Photo: Bloomberg

Officials of China’s central bank said Friday that there are plenty of policy tools and ample room for maneuver for the country to respond to internal and external uncertainties.

The comments came as China reported slower credit growth in April while facing renewed tariff clashes with the United States.

Hours before the central bank briefing, the U.S. increased tariffs on $200 billion a year of Chinese imports to 25% from 10%. China’s Ministry of Commerce responded by saying Beijing will retaliate. The escalation came as high-level bilateral negotiations to resolve the trade dispute were going on in Washington.

“In the face of a changing economic environment at home and abroad, China has ample room for monetary policy and plenty of tools in its policy kit, making it capable of responding,” said Sun Guofeng, head of the monetary policy department of the People's Bank of China.

Central bank data released Thursday indicated slower credit growth in April after a surge in March, fueling concerns over slowing economic growth and sparking expectations of further loosening of monetary policy.

The slower-than-expected April figures reflected mainly seasonal factors, and overall credit has remained on a rising track, said Zhang Wenhong, the central bank’s deputy statistics chief, at the same briefing.

The central bank will maintain a prudent monetary policy while keeping liquidity reasonably ample, Sun said. The monetary authority will properly manage money supply and fine-tune policies according to changes in economic conditions, Sun said.

Related: China’s Credit Growth Slows After March Surge


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By An Limin and Han Wei / May 11, 2019 02:41 AM / Finance

Photo: VCG

Photo: VCG

China’s market regulator Friday ordered Mercedes-Benz to fix flaws in its service after a customer complaint sparked a public outcry.

The German luxury carmaker came under the spotlight after a customer in the western Chinese city Xi’an complained in a viral video last month that she was poorly treated and charged a surprise 15,000 yuan ($2,240) “financial service fee” in a local Mercedes-Benz dealership when she bought a 660,000 yuan car.

An investigation later found that the dealership colluded with a third-party company to charge customers suspicious fees, according to state media. Mercedes-Benz said it would suspend operations of the dealership and launch an internal audit.

The State Administration for Market Regulation said in a Friday statement that charging a customer an extra financial service fee violates the law, and auto companies should provide proper after-sales service, including exchange and refund, according to regulations.

Mercedes-Benz said it has launched an inspection of its dealers to clean up violations and is working on new after-sales policies to improve services.

The high-profile complaint triggered heated debates over luxury car dealerships in China and sparked a series of complaints involving dealerships across the country.

Related: Luxury Car Dealers Squeezed by Slower Sales, Service Scandals


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By Zhang Yu and Zhao Runhua / May 10, 2019 04:19 PM / Finance

Photo: IC Photo

Photo: IC Photo

China’s Nasdaq-style tech board will have its first trading test this Saturday, according to an official notice.

According to a test plan from the Shanghai Stock Exchange, the bourse’s tech companies, information companies, trading participants and other related parties are required to attend the test.

The Saturday test will be a full-day trading simulation for nine key items, which includes subscription of new stocks and trading suspension of abnormal deals. Tests for the new price mechanism will also be arranged, which include doing away with the daily limits for stock price movements in the first five days of trading, and setting the limit after those five days at 20%. A daily limit of 20% doubles the one for stocks trading on other boards after the first trading day.

The regulator will arrange at least two other tests in May for the high-tech board. According to a document released by the China Securities Depository and Clearing Corp., all related technologies for the new board will be ready by the end of the month.

Related: Investors Flock to Funds Targeting High-Tech Board Stocks

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By Wei Yiyang and Denise Jia / May 10, 2019 04:09 AM / Finance

Photo: IC Photo

Photo: IC Photo

Hong Kong's banking regulator issued four more virtual banking licenses, bringing the total of authorized online-only banking operators to eight, the Hong Kong Monetary Authority (HKMA) said Thursday.

The four new license owners are Ant SME Services (Hong Kong) Ltd., a unit of Alibaba Group affiliate Ant Financial; Infinium Ltd., a joint venture between Internet giant Tencent Holdings Ltd., state-owned bank Industrial & Commercial Bank of China and Hong Kong Exchanges and Clearing Ltd.; Insight Fintech HK Ltd., a joint venture backed by smartphone maker Xiaomi Corp.; and a unit of Chinese insurance giant Ping An Group.

The HKMA said issuance of the four additional licenses completes the first round of virtual bank selection. The launch of the eight virtual banks, seven of which are backed by mainland internet or financial companies, is seen as a significant shake-up in the city’s traditional banking industry. The virtual banks intend to launch services in six to nine months.

Earlier this year, the HKMA granted virtual banking licenses to Livi VB Ltd., a joint venture formed by Bank of China and JD.com; SC Digital Solutions Ltd., a joint venture between Standard Chartered Bank (HK) Ltd., Hong Kong telecom provider PCCW and Chinese online travel company Ctrip.com; ZhongAn Virtual Finance Ltd., a subsidiary of Chinese online insurer ZhongAn Online P&C Insurance Co.; and WeLab Digital Ltd., a fintech company that offers mobile lending services primarily in Hong Kong and mainland China.

Related: Hong Kong Plugs Virtual Banks, Issuing First Licenses


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By Yue Yue and Zhao Runhua / May 09, 2019 12:45 PM / Finance

Photo: IC Photo

Photo: IC Photo

Growth continued to slow for some of China’s key government revenues in April due to a slowing economy and new tax-reduction policies, according to the latest data from the Ministry of Finance.

The country’s general public budget revenue climbed 2.8% year-on-year in April to 1.9 trillion yuan ($279.1 billion). The growth rate was 30% slower than that of March.

The country’s total tax revenues for the month grew a low 2.5% from the previous year to 1.7 trillion yuan. Individual tax and corporate tax revenues declined 35.7% and 2.2% year-on-year respectively.

Beijing plans to cut a whopping 2 trillion yuan worth of taxes and fees for 2019, according to the annual government work report released in March.

Related: In Depth: China’s Whopping Tax and Fee Cut Package Surprised Even Insiders

 

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By Ke Baili / May 09, 2019 12:13 PM / Finance

Total social financing includes financing that exists outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales. Photo: VCG

Total social financing includes financing that exists outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales. Photo: VCG

China’s total social financing (TSF), a broad measure of credit and liquidity in the economy, grew by a net 1.36 trillion yuan ($200 billion) in April, below analysts' expectations and substantially lower than a net increase of 2.86 trillion yuan the month before, central bank data showed Thursday.

TSF includes financing that exists outside the conventional bank lending system like initial public offerings and bond sales. The median forecast of analysts polled by Bloomberg had been 1.65 trillion yuan TSF growth in April.

In April, banks made 1.02 trillion yuan in net new yuan loans, central bank data showed, also missing forecasts and down from 1.69 trillion yuan in March.

China’s outstanding M2, a broader measure of the money supply that covers all cash in circulation plus deposits, grew 8.5% year-on-year at the end of April, slipping from 8.6% growth a month earlier, the data show.

Check caixinglobal.com throughout the day for further analysis on the newly released data.

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By Liu Jiefei and Zhang Yu / May 09, 2019 04:18 AM / Finance

Photo: IC Photo

Photo: IC Photo

Global index giant MSCI Inc. will increase the index weighting of more than 200 large-cap China A-shares by raising the inclusion factor to 10% from 5% this month, with details to be announced May 14 Beijing time and changes effective as of market close May 28, according to press releases issued Monday and in February.

An inclusion factor of 10% means that 10% of total market capitalization of the large-cap shares will be added to the indexes. The rise in the inclusion factor will most likely result in around $20 billion of inflows into the Chinese mainland stock markets, analysts said.

MSCI will also add large-cap shares on China’s tech-focused ChiNext board with a 10% inclusion factor this month.

According to its plan, MSCI will further increase the weighting of large-cap China A-shares by raising the inclusion factor to 15% in August and to 20% in November. Additionally, the company will add mid-cap China A-shares, including eligible ChiNext shares, with a 20% inclusion factor in November.

Related: MSCI Raises Weighting for China Stocks in Its Indexes

Correction: An earlier version of this story misstated the amount of index weighting change.

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By Yue Yue and Tang Ziyi / May 08, 2019 07:35 PM / Finance

Photo: IC Photo

Photo: IC Photo

JPMorgan is poised to become the first foreign company to take a controlling stake in a Chinese mutual fund after its joint venture partner put a 2% stake of the business up for sale.

The move comes after new rules unveiled last April allowed foreign asset management companies to own up to 51% of their Chinese mutual fund joint ventures, amid Beijing’s bid to further open up China’s financial services sector to foreign players.

JPMorgan Fleming Asset Management currently owns 49% of China International Fund Management, while its joint venture partner Shanghai International Trust owns 51%.

But Shanghai International Trust is auctioning off a 2% stake, according to a statement released Wednesday on the Shanghai United Assets and Equity Exchange. Caixin has learned JPMorgan Fleming Asset Management plans to purchase the stake, which would grant the company a majority stake of 51%.

JPMorgan declined to confirm the deal to Caixin. But the company announced last May that it was preparing negotiations with its joint venture partner in order to raise its stake to a controlling stake.

China International Fund Management was established in 2004. The company managed nearly 180 billion yuan (26.5 billion) of assets as of the end of last March.

Related: JPMorgan, Nomura Cleared to Control China Brokerages

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By Fran Wang / May 08, 2019 03:58 PM / Finance

Photo: IC Photo

Photo: IC Photo

China bank investors, take note.

Morgan Stanley has downgraded its recommendations on shares of China's big-four state-owned lenders, warning that Beijing's "resumption of less commercially viable credit policy” to support economic growth could lead bad loans to soar and eat into banks' profit.

The brokerage giant lowered Shanghai- and Hong Kong-listed shares of Bank of China and Agricultural Bank of China, as well as A-shares of Industrial and Commercial Bank of China and China Construction Bank, to "equal weight" from "overweight," it said in an analyst report.

"Overweight” suggests the stock is expected to outperform its peers and is often seen as a recommendation to buy, whereas “equal weight” indicates the stock’s performance is projected to be in line with its sector. An “underweight” rating means the stock's total return is expected to lag behind the industry average.

Morgan Stanley also lowered its rating on Hong Kong-traded H-shares of Chongqing Rural Commercial Bank and Bank of Chongqing to "neutral" from "buy," citing similar concerns.

Related: More Banks Forced to Recognize Bad Loans Under Tougher Standard

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