Boost for cornerstone investors on China firms’ IPOs in HK
Mainland China enterprises will first sign stock-purchase agreements with cornerstone investors before their launch on the Hong Kong market
China’s FX regulator is planning a new “foreign exchange green channel” to help domestic investors participate in the initial public offerings of mainland companies in Hong Kong as cornerstone investors, according to an unnamed source from the State Administration of Foreign Exchange, reported by the National Securities Daily on Monday. This marks another step forward for China to gradually open its capital account. It means before enterprises from mainland China launch on the Hong Kong market, they will first sign stock-purchase agreements with well-known institutional investors or rich and famous individuals, the so-called cornerstone investors. China Merchants Securities and Postal Savings Bank of China both of whom recently listed on Hong Kong’s stock market had successfully attracted cornerstone investors, the report said.
VAT tax reforms ‘not fueling property bubble’
In an attempt to counter market rumours, the People’s Daily wrote on November 6 that companies are not using the change in the VAT law to speculate on the residential market. While real estate properties are included as deductibles under the new VAT tax reform for companies since May this year, no large enterprises have been buying houses using the corporate tax deduction in major cities such as Shenzhen and Shanghai, according to the report. The commentary came at a time when there is speculation that large enterprises are contributing to the property bubble by buying up “shell properties”. The People’s Daily report said banks did not offer mortgages to large enterprises and these companies had to pay the full amount if they did make a purchase, so that their effect on the property market was “limited”.
Three coal giants cut their prices
Three major coal enterprises – China Coal, China Shenhua and Inner Mongolia Yitai Group – cut their price of coal by 10 yuan per metric ton, according to a Securities Daily’s report on Monday. Analysts believe the move is to declare their political correctness in following the government’s aim to prevent excessive fluctuations in coal prices, while the supply still exceeds demand in the market. The current price will remain in place for a while.
US$40 billion in deals sealed at Airshow China
Deals worth US$40 billion were concluded at the 11th edition of Airshow China, which ended on Nov. 6, according to organisers’ figures in a Shanghai Securities Journal report on the same day. Some 187 types of aircrafts changed hands at the six-day show, the report said. Among domestic firms, China Aerospace Leasing Company sold 40 ARJ21-700 commercial planes and SPDB Financial Leasing sold 20 C919 commercial jets, according to the report.
Supply side reforms yet to be completed: official
The head of the Development Research Center under the State Council said on Nov. 6 that China’s supply side reforms had yet to be finished, according to China News on the same day. Li Wei, the head of research, said the purpose of supply side reforms was to drive the economy through fundamental changes in the economic system. Li said that while there are some gains in supply side reforms, the project was far from over. Li said this was to improve the “real” economic system versus the “theoretical” system, and the economy should adapt to new changes through the development of sectors such as in e-commerce, robotics, artificial intelligence, 3D printing and other new technologies.
Investors must share risks: securities watchdog
All investors of structured asset management schemes shall share risks and returns, the Chinese security watchdog reiterated in a Q&A document issued in late October, Caixin reports, further clarifying the regulations on private fund management announced in July. The regulator emphasized that such appropriation should be “fair without transfer of interest”, but did not specify how exactly the risk should be shared among senior, mezzanine and equity investors, causing disagreement in the market.