China Direct

City of London Corporation reports record 22% UK RMB clearing growth

 

CBI member, City of London Corporation has published the latest instalment of its London RMB Business Quarterly Review.

In this quarter’s edition, the City of London reports that nearly 3 trillion RMB was cleared by the designated UK RMB Clearing Bank (China Construction Bank London Branch) between September and November 2019, up 22.7% year-on-year. Daily foreign exchange RMB trading volumes also saw a rise, averaging more than £82 billion in quarter three (July to September 2019), up 4.29% year-on-year. Meanwhile, total RMB cross-border settlement between China and the UK for the first 11 months of last year also hit historic levels, rocketing 66% year-on-year to around 590 billion RMB.

Between January and November 2019, there were 41 Dim Sum bonds newly listed on the London Stock Exchange worth nearly 15 billion RMB, an increase of 15.5% on the same period in 2018. Issuers include China, the UK, Middle East, Australia, and Japan.

Catherine McGuinness, Policy Chair at the City of London Corporation, said: “I’m pleased that we continue to attract record levels of RMB trading, clearing and settlement. […] The UK leads the world when it comes to foreign exchange and we will continue to do so for the foreseeable future. […] I look forward continuing to celebrate the UK’s role as leading offshore RMB trading hub outside of Greater China for many years to come.”

The report also discusses opportunities for international investors in China’s equity and bond markets, exploring onshore hedging tools and products available.

To read the report in full, please follow the link.

HSBC unveils first international banking centre in Mainland China

 

CBI member, HSBC has announced that it has launched its first International Banking Centre (IBC) in Mainland China. Located in a new sub-branch in Shanghai, the IBC seeks to serve growing demand for international banking services from domestic and overseas customers. HSBC is the first foreign bank in Mainland China to setup a dedicated international banking centre.

Richard Li, Executive Vice President and Head of Retail Banking and Wealth Management, HSBC China commented: “As more of our customers and their families become more internationally-minded and mobile, they are now looking for specialist advice and dedicated support for their international financial needs.

Our IBC will focus on delivering these services through teams that combine extensive experience supporting international customers with the deep knowledge contained in our network of offices in 65 countries and territories. […] Over the past three years, we’ve seen double digit annual growth in the number of HSBC China customers using our international banking services. HSBC also services over 1.5 million overseas Chinese customers around the world.

As the largest international bank in mainland China, the new IBC reflects our continued investment in our capabilities to grow our presence and meet the evolving needs of customers here. We plan to open more IBCs in other areas where we see solid demand for international financial services.”

To read the press release in full, and to see the full range of services that HSBC’s International Banking Centre will offer, please follow the link.

JP Morgan announces China expansion

 

CBI member, JP Morgan has announced that it has competed the preparatory work to take full control of its securities joint venture in China, and while waiting for final permission from the China Securities Regulatory Commission to officially launch the business, has taken on additional staff to strengthen its business activities in investment banking, research and securities sales.

Mark Leung, CEO of JP Morgan China, said “We think this is the best time for JP Morgan to [become] more deeply involved and invest much more broadly across our product and service platforms. […] JP Morgan welcomes the opportunity presented by China’s new regulation, [which allows for 100% foreign ownership] and the bank will fully leverage the strength in its global network and resources to operate its onshore and offshore China business. […] While it depends on the speed of opening up, I think the conditions are more mature now. […] We are working actively with local regulators to share our experience in enhancing derivatives and securities financing, to help speed up foreign participation into the local market and to provide onshore investors with the best derivatives and securities financing capability that JP Morgan has to offer.”

JP Morgan is also planning to invest further in the growth of the asset management arm of its China business. The bank’s asset management business recently formed a strategic partnership with China Merchants Bank, under which JP Morgan will serve as the preferred product provider for China Merchant Bank’s asset management subsidiary, offering a greater number of offshore and onshore products to Chinese clients.

British Business optimistic about 2020 China market opportunities

Dear CBI Members and Partners,

The British Chamber in China recently published its 2020 British Business Sentiment Survey in Beijing.

The Survey revealed that:

• More than 50% of respondents were optimistic about the China market and intended to continue to invest

However:

1. More UK businesses report that it is harder to do business in China
2. More than 30% feel that they are not treated fairly compared to domestic firms

According to the Survey the top three regulatory issues are:

1.     Cybersecurity & IT restrictions
2.     Accessing and moving company finances
3.     Competition with SOE (State Owned Enterprises) or state-sponsored companies  

For a detailed overview of the Business Sentiment Survey (English & Chinese versions) please access and download the survey here.

Our thanks to partner The British Chamber in China for sharing these insights.

UBS first foreign bank to sponsor China Star tech bourse IPO

 

 

CBI member, UBS has announced that it has become the first foreign bank to sponsor an initial public offering (IPO) on China’s new tech-focussed Star Market trading bourse, where underwriters are required to invest in the listings they bring to the market.

The Star Market was launched in Shanghai in July, and is modelled on New York’s Nasdaq Index. The intention behind the bourse is to provide domestic technology innovators with a platform through which they can attract investment, ensuring they have resources to develop and compete globally. The bourse utilises a registration-based IPO system to facilitate companies’ funding, whereby if a company wishes to list a subsidiary or invested part of its business on the Star Market, the parent company must also become an investor in the listing.

UBS Securities, the bank’s majority-controlled joint venture in China acted as the sole underwriter for the IPO of Haohai Biological, a Chinese bio-chemical R&D company. Swiss-based, UBS AG subsequently become an investor in Haohai Biological, as required by Star Market listing rules. The company was previously listed on the Hong Kong Stock Exchange but has subsequently become the first company to be dual listed in Hong Kong and on the Star Market. Upon listing, the company was oversubscribed by more than 2,400 times, reflecting strong initial demand for securities listed on the market.

The launch of the Star Market was praised by analysts as a step towards embracing market forces in China’s economy, since companies that list an IPO on the bourse are priced by the market.

UBS said that this feature means that the Star Market opens up new revenue channels for its securities operations in China.

David Chin, head of UBS investment banking, Asia-Pacific said: “[The Star Market] is one of a series of capital market innovations rolled out in China this year which, collectively, present new business opportunities for us.”

UBS is one of only a small number of foreign banks permitted to sponsor IPOs in China. Historically, investment banking fees on IPOs issued on China’s stock exchange boards had been far smaller than in other markets, such as Hong Kong. However, Star Market deals are reportedly paying out more than IPOs on the Shanghai Stock Exchange’s main board. Banks reportedly took in $103m in revenue from $2.3bn in Star Market IPOs in October, while the Shanghai exchange listing made just $32m in revenues for investment banks on $2.2bn in IPOs during the same period.

City of London launch new professional services platform

 

CBI member, City of London Corporation has launched a new website to promote the city’s professional and financial services firms ahead of the UK’s departure from the European Union.

The website, which can be accessed at: www.theglobalcity.uk , offers businesses a comprehensive range of resources on a wide range of subjects, and advice on employing the services of professional services firms operating within the UK’s capital city.

CBI members with China interests should note that City of London Corporation’s recent reports on London’s economic relationship with China, including an in-depth study into collaboration in green finance, FinTech, Renminbi Globalisation and the Belt & Road Initiative, can now all be downloaded free of charge.

To explore the new website further, please follow the link.

CPP partners with Bank of Communications to provide China online loss reporting services

CBI member, CPP Group has partnered with the fifth-largest bank in China, Bank of Communications, to provide its online Loss Reporting Service.

Bank of Communications has 74 million registered mobile banking customers, who will all be able to report the loss of their cards through CPP Group’s service on the popular banking app, Mai Dan Ba.

CPP Group will then provide Bank of Communications online banking customers with 24/7 online assistance in the event of their card going missing.

Jason Walsh, CEO at CPP Group, said: “China is a very important market for CPP and the partnership with Bank of Communications is a clear reflection of our ambitious growth plans in this area. In our recent half year financial results announcement, we were pleased to report that revenue in China has grown by 84% compared to the same period last year. This impressive growth shows the significant market opportunity available to CPP, with the team in China playing a significant role in us realising this potential.”

Wilson Chan, CEO at CPP China, said: “In the first six weeks of our partnership with Bank of Communications we have already generated over 30,000 new customers. This indicates the success the product is seeing and also how important this type of service is to consumers in China. Our expert team is working closely with our business partners to continue offering services to meet the demand of the market.”

To read the press release in full, please follow the link.

J.P. Morgan moves to include China bonds in key indices

 

 

CBI member, J.P. Morgan has announced that it will start to include liquid China Government Bonds in its Government Bond Index – Emerging Markets indices, that help investors track local currency bonds issued by the governments of nations identified as being emerging markets.

While China has been listed on J.P. Morgan’s Government Bond Index – Emerging Markets Broad index (GBI-EM-Broad) since 2013, that was on a list which included all eligible countries, regardless of capital controls and / or regulatory and tax hurdles for foreign investors.

J.P. Morgan’s decision to upgrade China from the GBI-EM-Broad to the narrower Government Bond Index – Emerging Markets (GBI-EM) is a symbolic statement of support of China’s currency; the steps the country has taken to open up and improve the regulation of its financial service sector; and the desire of the Chinese government to internationalise the Renminbi.

The GBI-EM is the most restrictive indices series listed by J.P. Morgan and limits inclusion to only those countries whose economies are readily accessible and where no impediments exist to foreign investors.

Chinese government bonds will begin to be tracked as part of the suite from February 2020 onwards in a staggered process that will see the country’s weighting rise to 10%.

Analysts predict that the inclusion of Chinese government bonds in the top-tier index will lead to around $3 billion inflows into China’s bond market a month as a result. The move was welcomed by other major financial institutions, who predominantly took the line that increased foreign inflows should serve to institutionalise China’s onshore market and lead to lower volatility and a heightened focus on securing the fundamentals of the regulatory environment.

Prudential Half Year results show strong Asia growth

 

 

CBI member, Prudential has released its Half Year Results for 2019. Headline results include the fact that the company’s Asia operating profit increased by 14% to account for 18% of Prudential’s international takings. Mike Wells, Group Chief Executive said: “The Group’s performance has again been driven by [Prudential’s] Asian business, where we have delivered double-digit growth across our key metrics of operating profit.”

Total assets under the Prudential’s Asia asset management subsidiary, Eastspring, grew by 12% to £169.5 billion, with positive external net flows of £3.1 billion. Prudential’s growth across the Asia – Pacific shows no signs of slowing, with new business profit also up by 10%.

Mr. Wells was optimistic this strong performance would continue into the fourth quarter, citing the fact that “Preparations are complete for Prudential’s move to Group-wide supervision by the Hong Kong Issuance Authority [in anticipation the demerger if M&G Prudential]. We believe that the demerger will enable both businesses to maximise their potential performance. Both will have experienced management teams better able to focus on their strategic priorities and distinct investment prospects, as well as improved allocation of resources and greater flexibility in execution.”

To read Prudential’s Half Year 2019 Results in full, please follow the link.

BNP Paribas receives China Onshore Debt Underwriting Approval

 

CBI member, BNP Paribas and Deutsche Bank have become the first foreign banks to receive approval from China’s regulators to lead underwriting for all kinds of onshore debt in China.

China’s National Association of Financial Market Institutional Investors, which regulates the interbank bond market, said in an announcement dated Monday that BNP Paribas and Deutsche Bank had been granted Type-A licenses, allowing the European banks to underwrite all varieties of renminbi-denominated debt for both local and foreign companies.

BNP Paribas will now have much greater access to China’s $12.9 trillion-dollar domestic bond market than other foreign rivals. Previously, BNP, HSBC and Standard Chartered had all been granted Type-B licenses, which only permit lead underwriting for offshore RMB issuance – known as Panda Bonds.

Chang Geng Lai, chief executive of BNP China said: [This license] is recognition of [BNP Paribas’ work to develop and deepen foreign expertise in Chinese capital markets.”

By way of comparison, the size of the market accessible to financial service providers with a Type-B license is a sliver of what BNP Paribas now has access to. While last year’s Panda Bond issuance of $5.8 billion was a record high, it was less than 1% of the $843 billion issued onshore.