TALKING POINTS | Financial Services 26/03/19

In today’s talking points, the Australian share market has suffered broad-based losses across the index, China’s newly passed Foreign Investment Law looks to bring substantive changes to foreign investment into China and China’s first private and digital-only bank seeks expansion into Australia.

 

Australia’s share market update

On Monday the Australian share market closed sharply lower, with broad-based losses across the index.

The benchmark S&P/ASX 200 index fell  69.00 points or 1.11 percent at 6,126.20, while the broader All Ordinaries index was down 72.20 points or 1.15 percent at 6,208.70.

In the financial sector, Australia’s big 4 banks also suffered losses, with the Commonwealth Bank down (0.91 percent), Westpac Bank down (1.47 percent), National Australia Bank down (0.88 percent) and ANZ down (2.26 percent).

Mining stocks also weakened with BHP down (1.28 percent), Rio Tinto down (1.10 percent), Fortescue Metals down (1.21 percent). However, gold miner Newcrest experienced a rise (3.19 percent).

Following a fall in crude prices, the country’s oil and gas producers were under heavy pressure with Woodside Petroleum down (2.82 percent), Santos down (3.76 percent) and Oil Search down (3.27 percent).

Australia’s largest supermarket companies saw mixed results with Wesfarmers up (0.66 percent) and Woolworths down (0.36 percent).

While telecommunications heavyweight Telstra improved (0.61 percent), the national carrier Qantas dropped (0.92 percent) and biomedical firm CSL sank (0.96 percent).

Source: Xinhua News

China’s New Foreign Investment Law

 On Friday 15 March, the Chinese national legislature passed the new foreign investment law, which aims to put foreign companies that invest in China on an equal footing with local firms.

The law introduces commitments to the pre-establishment of national treatment for foreign firms on a negative list basis. It also promotes equal treatment of foreign firms with respect to policies that promote the development of enterprises. It also introduces a complaints mechanism, promotes greater transparency and provides opportunities for foreign investors to comment on rules and regulations affecting the foreign investment environment.

The pre-establishment national treatment and negative list for foreign investment will allow Australian companies to open up investment in China by promoting merits-based treatment. This will allow Australian companies to continue to improve themselves in the sectors they excel in, in particular: financial services, infrastructure, retail, health, agriculture and professional services.

Sources: Xinhua News; ABC News; 2018 Doing Business in China Report

China’s first private and digital-only bank seeks expansion into Australia

China’s first private and digital-only bank, WeBank, is looking to expand into Australia

Australia’s banking industry is dominated by the “big four” banks, National Australia Bank (NAB), Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia and Westpac, who said they welcome the competition. The country is already home to a couple of digital banks, with more expected to follow.

WeBank is China’s first digital bank and is valued at around $21 billion. It is backed by one of the world’s biggest internet companies Tencent, Shenzhen Baiyeyuan Investment Co and Shenzhen Liye Group.

To conduct banking business in Australia, WeBank will first need authorisation from the Australian Prudential Regulation Authority (APRA), the statutory authority that regulates the Australian financial services industry.

Under the APRA guidelines, foreign authorised deposit-taking institutions need not maintain capital in Australia. However, they must be subject to adequate supervision in their home country with consent from their home supervisor for establishing a banking operation in Australia.

Source: China Daily