Financial Services Talking Points | 31/03/17

In today’s talking points: Foreigners to be Wooed into China’s Bond Market; China’s economic recovery just ticked up another notch; Agricultural Bank Agrees Debt-Equity Swaps Worth 70 Billion Yuan.

Foreigners to be Wooed into China’s Bond Market?

A mirroring effect of policy Changes, China determination to open its $9 trillion bond market to global investors embrace the mainland bond market connections with Hong Kong and allowing access to interbank bond market to trade derivatives to hedge currency risks. According to Mark Austen, CEO of the Asia Securities Industry & Financial Markets Association, the current major difficulties lay in the market not being very liquid – lacking sufficient trades with the repo market being more of a ‘pledge’ not a ‘true sell’. investors interested in gaining a bit of exposure without the added paperwork should be watching. Austen advises, to insure you understand the standards of the market and to put energy into human capital and relations, foreign investors cannot afford to ignore the size and potential.

Read more at Caixinglobal

China’s economic recovery just ticked up another notch

According to new statics, China’s economy continued to perform strongly in March. The government’s official manufacturing Purchasing Managers Index (PMI) rose to 51.8 in March from 51.6 in February, leaving it sitting at the highest level since April 2012. The PMI measures changes in activity levels across China’s manufacturing sector from one month to the next, and ranges from a score of 0 to 100. 50 is deemed neutral, with anything above this level indicating that activity levels improved. It suggests that the momentum built over the second half of 2016 is now strengthening in early 2017. By size of manufacturer, larger firms continued to outperform their smaller peers. New orders and new export orders also grew at a faster pace than a month earlier, while firms held staffing levels unchanged after several years of job-shedding. Purchases of raw materials grew at a slightly slower pace, coming in at 59.3 from 64.2 in February. Still rapid, but slower nonetheless.

Read more at Business Insider

Toxic Debt Tackled by Private Firm joining hands with Government

Planning to raise 10 billion yuan from investors, with most going to buy non-performing loans state-owned investment firm China Chengtong Holdings Group Ltd. With private fund manager will assist in relieving banks and local governments of about 7 billion yuan ($1.02 billion) in toxic debt. Chengtong Huan’s plan ultimately aims to clear out trillions of yuan in unpaid loans to state-owned companies and government financing platforms. Shoreline’s Co-founder and managing partner Zhao Xiaolin has been confidentially dealing with distressed debt for over a decade and brings a wealth of solution strategies, with $1.5 billion under management, 100 billion yuan in take overs with a 20% annual average returns. In accordance to the China Bank Regulatory Commission (CBRC) after 2016 1.5 trillion yuan were totalled to be weighing down future economic prospects. For this reason, Chengtong Huan Chairman Zhang Baowen is optimistic about a “fast, in fast out” strategy clearing debts with the assistance of private investors and paying them within four-year period.

Read more at Caixinglobal

 Agricultural Bank Agrees Debt-Equity Swaps Worth 70 Billion Yuan

Agricultural Bank of China Ltd. (ABC) has signed agreements with eight companies to swap their debt worth more than 70 billion yuan ($10.2 billion) to equity as the lender’s nonperforming loan ratio declined in 2016. ABC, the country’s third-biggest listed lender by assets, is in discussion to undertake more than 20 debt-to-equity swap deals from the eight enterprises, bank President Zhao Huan said during a news conference Wednesday. The lender plans to invest 10 billion yuan to create an asset management company to deal with debt-to-equity swaps and buy the bank’s bad assets, Zhao said. Regulators are currently reviewing the plan. ABC’s nonperforming loan ratio totaled 2.37% at the end of last year, 0.02 of a percentage point down from 2015, according to the lender’s annual earnings report. 

Read more at Caixin global