Financial Services Talking Points | 30/06/2017

In today’s talking points: ANZ inreases pressure over SA bank levy; Chinese bond market prepares for opening up; foreign graduates increasing difficulty to find  financial service sector opportunities in China; Australian dollar on the rise.

ANZ Increases Pressure Over SA Bank Levy

Since the announcement of the $370m bank levy announced last week, ANZ Bank has sold tens of millions of dollars in South Australian bonds. The bank is also considering selling down more of its multi-billion dollar holdings as it reconsiders investing in South Australia, believing that the risk profile has increased in the state since the new bank levy. Currently, ANZ hold around about $2 billion of South Australian government debt in bonds. The bank is required by law to hold a certain amount of government bonds as a liquid asset, and is looking elsewhere to invest into government bonds. ANZ has had a previous history of backing the SA government on a number of projects such as Royal Adelaide Hospital and UniSA’s Business Growth Program. The state tax, which mirrors a bank levy imposed by the federal government, will raise around $100m a year for state governments. The levy still needs to pass in the state parliament’s upper house from Australian Conservatives and Nick Xenophon Team MPs.

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Chinese Bond Market Prepares for Opening Up

A trading link for bonds between Hong Kong and Mainland China is expected to be soon be released, a scheme that will make Mainland China’s $US10 trillion more accessible. Although the exact date the market will come online is yet to be announced, there is speculation that it will be opened on the 3rd of July, shortly after the 20th anniversary of Hong Kong’s return to the motherland. Much automation has been added to and red tape cut from the bond trading process, news that is exciting relevant businesses and investors. “Regulators have done a fantastic job to simplify the whole process, freeing overseas investors from mountains of paperwork” said James O’Sullivan, manager of securities services at Standard Chartered Bank in Hong Kong. This new trade link will provide ease to foreign investors wanting to invest in the Chinese bond market, which will in turn make China’s bond market more global.


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Foreign Graduates Increasing Difficulty to Find Financial Service Sector Opportunities in China。

Though in recent years, many foreign graduates look to China to launch their careers, finding a job in China is now becoming a challenging feat for foreigners. The main reason stems from the Chinese policy requiring applicants obtaining a work visa to have at least two years of related work experience. This is further complicated where study visas expire as soon as the foreign students graduate. Like most other countries, China understandably prioritizes its jobs for their citizens. Furthermore, with low starting salaries but increasing living costs, foreign graduates may be quickly deterred from considering China as a destination for career development.


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Australian Dollar on the Rise

An already stronger Australian Dollar rose a bit further Friday after a strong performance of China’s manufacturing sector. The official Purchasing Managers Index came in at 51.7, above both the 51.0 expectation. The Australian Dollar can act as the financial market’s favorite liquid China proxy and may have done so to an extent according to recent data. Both the AUD and USD have continued to rise over recent times, however it will be more likely that the AUD continues to remain strong. The Reserve Bank of Australia meets to set monetary policy next week and investors seem prepared to bet that it to will make noises about the end of ultra-low interest rates.


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