ASIFMA - 13 - 19 Nov 2013 | Issue 180

13 - 19 Nov 2013 | Issue 180 Spotlight ASIFMA Annual Conference 2013: Developing Asia's Capital Markets -- 20 & 21 November ASIFMA, GFMA's Asian affiliate, is proud to present the Annual Conference in Hong Kong, with the theme for this first-of-a-kind, two-day event as "Developing Asia's Capital Markets". The conference is an industry wide occasion, providing a unique opportunity for global and regional policymakers, high-level regulators and industry representatives from sell-side and buy-side firms to meet and discuss important issues affecting the development of Asian capital markets. Update CHINA Chinese leaders stress reform implementation The decision on "major issues concerning comprehensively deepening reforms" approved by the Communist Party of China (CPC) Central Committee on Nov. 12 will have a far-reaching influence on economic and social development as well as improving people's living standards, said Yu Zhengsheng, chairman of the National Committee of the Chinese People's Political Consultative Conference (CPPCC). CPC's third plenum shows signs of reform | (Chinese only) The Communist Party of China (CPC) 18th Central Committee's Third Plenary Session has ended following a four-day closed-door meeting among China's top Communist Party leaders. Amongst other things, the Party has pledged to improve the country's financial system. The Communique released on 12 November 2013 does not detail how this will be done, but it is anticipated that it may involve the liberalisation of the RMB and interest rate, and the introduction of a deposit insurance system. Private investment will also be encouraged in order to enhance efficiency in State-owned enterprises and banks, as a result of which competition in financial services may intensify. The Communique also stresses the importance of developing an advanced tax system, a set of scientific fiscal policies and clear legislation that defines the roles of different levels of government bodies. Moreover, the Communique emphasises that in order to achieve economic globalisation, China must expedite the opening up of its markets by reducing investment barriers and thresholds. A State Security Council will be set up for national security and a Comprehensive Reform Deepening Leading Group will be established as a new organ to spearhead reforms in China. The Communique also calls for accelerating the development of a free trade zone. The core principle to all these reforms which the Communique places special emphasis on is the role of the market, which it states will be 'decisive in the allocation of resources'. Finally, the Communique sets a timeline whereby 'decisive results' must be achieved in all key areas by the year 2020. CPC publishes decision and explanation of Third Plenum | (Chinese only) The Communist Party of China (CPC) has published the decision of the CPC on major issues relating to the overall deepening of reform and an explanation by the General Secretary of the CPC and China's President Xi Jinping. The documents follow the Communique issued following the closing of the CPC's 18th Central Committee's Third Plenary Session on 12 November 2013. The documents form the blueprint of China's future policies with a view to reviving and fostering economic growth through reforms in various areas. The core principle is that the market will determine pricing and the allocation of resources, and as such the government will play a diminished role to the extent of ensuring economic stability and improved public services. The documents envisage achieving decisive results on reforms in key areas by year 2020. PBC issues “Notice of the People's Bank of China on Establishing a Verification Mechanism for Customer Reserve Fund of Payment Institutions” | (Chinese only) PBC issues “Notice of the People's Bank of China on Establishing a Verification Mechanism for Customer Reserve Fund of Payment Institutions” (the Notice).The Notice requires payment institutions and reserve banks to verify customer reserve fund on a daily basis, so as to ensure accounts are consistent and match customers’ businesses. This serves as an important measure for PBC to enhance payment institutions’ depository business management of customer reserve fund and protect the financial interests of consumers. CSRC and CBRC jointly issue Guidelines on Capital Replenishment of Commercial Banks by issuing Corporate Bonds | (Chinese only) CBRC and CSRC made a joint announcement and published "Guidelines on Capital Replenishment of Commercial Banks by issuing Corporate Bonds" (Guidelines), effective as of November 6, 2013. Under the Guidelines, three categories of banks, such as commercial banks listed on Shanghai or Shenzhen Stock Exchanges, domestic commercial banks issuing overseas listed foreign shares, and commercial banks under examination applying for domestic initial public offerings (“Commercial banks listed or to be listed”), are deemed as issuers that can replenish their capital through the bond market, should they meet conditions. In the selection of capital instruments, the Guidelines allow commercial banks to issue corporate bonds containing writedown provisions. CSRC to release plan for expanded OTC market The complete implementation plan involving the expansion of an over-the-counter equity transaction system nationwide is expected to be released at the earliest on Friday, a securities companies' leader said, broadening financial channels for unlisted small-scale enterprises. (ECNS) NAFMII formulate "General Terminology for China OTC Gold Derivatives (2013 Edition)” | (Chinese only) In an effort to regulate OTC gold derivatives transactions, safeguard the legitimate rights and interests of market participants, promote healthy and orderly development of the OTC gold derivatives market, NAFMII organized market players and legal experts to formulate “General Terminology for China OTC Gold Derivatives (2013 Edition)” (“General Gold Terminology”). Adopted at the six plenary session of the third Governing Council, approved by and filed with the People's Bank of China, the General Gold Terminology is hereby published for market participants to use in OTC gold derivatives transactions. SAFE issues circular on exchange control issues for pilot small-amount 'Wai Bao Nei Dai' business in certain areas | (Chinese only) On 26 October 2013, the SAFE launched a pilot programme that allows small-amount loans borrowed by onshore entities from onshore banks to be secured by guarantee, pledge and/or mortgage provided by foreign guarantor / security provider through a simplified process. Under the pilot programme: A borrower can, with the support of the security, borrow up to RMB 50 million within a calendar year, while the unrepaid outstanding principal amount cannot exceed the borrower's net assets by the end of last year; The onshore lender should verify the borrower's eligibility and collectively file the details of the loans and the security with the local SAFE office on a monthly basis; The use of the proceeds from the relevant loans is limited to operations within the borrower's business scope; The onshore lender needs to obtain the SAFE's approval to enforce the security, which can be obtained after the receipt of enforcement proceeds; and Indebtedness owned by onshore borrowers upon the enforcement of the security is not subject to foreign debt quota or registration and can be repaid by presenting the copy of the SAFE's approval; and The pilot is currently geographically limited to Guangdong (including Shenzhen), Zhejiang and Fujian. China vows to ease foreign ownership limits, allow competition with state firms China’s leaders pledged Friday to open state-dominated industries wider to private competition and ease limits on foreign investment in e-commerce and other businesses in a sweeping reform plan aimed at rejuvenating a slowing economy. (Brunei Times) China State Companies’ Dominance Tested by Market Pledge China’s state-owned companies, coddled by cheap credit and sheltered monopolies for years, face a less comfortable future after Communist Party leaders pledged to give market forces a bigger role in the economy. (Bloomberg) China helps fuel growth in global shadow banking The world's "shadow banking" sector grew by $5 trillion last year to $71 trillion, helped by a 42 percent expansion in China, according to the latest annual figures from the Financial Stability Board. (Reuters) HONG KONG Exchange Fund makes record gains in third quarter, but HKMA warns of uncertain outlook A strong stock market rally helped Hong Kong’s Exchange Fund turn around to record investment gains in the third quarter, but the Hong Kong Monetary Authority warned that challenging investment conditions remain in place. (SCMP) HKMA’s Yue calls for offshore RMB co-operation Hong Kong and the United Kingdom should not compete for offshore renminbi trade, as there is "plenty of room to grow the pie together" according to Eddie Yue, a deputy chief executive at the Hong Kong Monetary Authority (HKMA). Yue said the two countries could play "complementary roles" in the growth of the renminbi as a global reserve currency and "benefit from the process together". (Central Banking) SFC introduces streamlined measures for scheme changes and revision of offering documents of ILAS The Securities and Futures Commission (SFC) has issued a circular to issuers of SFC-authorised investment-linked assurance schemes (ILAS) to introduce certain streamlined measures for enhancing the applications process for scheme changes approval and the authorisation of revised offering documents in respect of ILAS. SINGAPORE Singapore hopes for early ratification of EU-S'pore Free Trade Agreement Singapore has been pushing for early ratification, with President Tony Tan Keng Yam's state visit to Slovakia and Hungary coming after the most recent visit to France and Poland by Prime Minister Lee Hsien Loong. Dr Tan also underlined the need for Singapore to continue engaging even more countries in the EU for their support. Singapore's Financial System Assessed to be Well-Regulated The Monetary Authority of Singapore (MAS) announced today that an assessment under the International Monetary Fund (IMF)’s Financial Sector Assessment Programme (FSAP) has found Singapore’s financial sector to be well-regulated and highly developed. INDIA India may allow companies to sell rupee-linked bonds abroad India is considering allowing local companies to issue rupee-linked bonds overseas, as it seeks to open up a new source of funding for companies and attract foreign-currency inflows needed to finance its current-account deficit. The plan follows a recent decision of the government allowing International Finance Corporation, an arm of the World Bank, to issue rupee-linked bonds abroad and bring the proceeds to India to fund local companies. (WSJ) India Central Bank Chief Tries to Calm Markets India's central bank governor Wednesday focused on the brighter side of the economy—narrowing current-account deficit and slowing core inflation—as he tried to calm investors worried over the impact of a likely rollback of easy money policies in the U.S. India is much better prepared now than a few months ago to handle a rollback of U.S. policies, Raghuram Rajan told reporters. (WSJ) RBI allows SEBI registered FIIs, QFIs and long term investors to invest in credit enhanced bonds RBI has issued a circular which allows foreign institutional investors (FIIs), qualified foreign investors (QFIs) and long term investors registered with the Securities and Exchange Board of India – which include sovereign wealth funds, multilateral agencies, pension / insurance / endowment funds and foreign central banks – to invest in credit enhanced bonds, as per the provisions of Circular No. 120 dated 26 June 2013, up to a limit of USD 5 billion within the overall limit of USD 51 billion earmarked for corporate debt. SEBI proposes new norms for search and seizure powers Armed with greater authority to crackdown on fraudsters and defaulters, Sebi today proposed new norms to exercise its powers to conduct search and seizure during investigations, while adopting necessary safeguards to protect the rights of persons subjected to such operations. (Economic Times) ESMA: SEBI needs to step up criminal enforcement in markets European market watchdog ESMA has lauded SEBI for developing a robust surveillance and enforcement system but has called for a stepped-up criminal enforcement framework for capital market violations in India. (Economic Times) SEBI consulting market intermediaries on FATCA pact Market regulator Sebi is consulting intermediaries regarding an inter-governmental agreement to be signed between India and the US under the Foreign Account Tax Compliance Act. The Securities and Exchange Board of India (SEBI) is likely to meet stock brokers this week, according to officials. (Economic Times) JAPAN Central Bank Bullish Despite GDP Slowdown Japan’s economic slowdown over the summer has done little to change the Bank of Japan’s view toward the economy, people familiar with the central bank’s thinking say, suggesting that more bad signs would be needed to spur the bank into action. (WSJ) Abenomics Buoys Investors' Confidence Foreign investors are pouring billions of dollars into Japanese stocks as Prime Minister Shinzo Abe keeps up his resolve to bolster the country's long-troubled economy. The allure is Abenomics—Mr. Abe's plan to boost public spending, put an end to deflation, and rein in the yen's strength to aid exports. (WSJ) AUSTRALIA Australia Plans Longest Bond at 20 Years Amid Debt Ceiling Spat Australia plans to sell 20-year notes, its longest-tenor nominal bond ever, fulfilling a promise by Treasurer Joe Hockey to extend the yield curve as the government seeks to finance ongoing budget deficits. (Bloomberg) NEW ZEALAND Reserve Bank chiefs step up warnings on New Zealand financial stability New Zealand's soaring house prices and high levels of debt continue to pose risks for the country's financial system despite measures to rein in lending, heads of the Reserve Bank of New Zealand (RBNZ) said Wednesday. (Global Times) THAILAND Thailand Cuts Economic Growth Forecast as Exports Falter Thailand cut its growth forecast for the year after the economy expanded less than analysts estimated last quarter and as weakening exports damp the outlook for consumption and investment. (Bloomberg) Thai Unrest Seen Curbing Recovery From Recession Thailand’s biggest bout of political unrest under the current government has increased economic risks, threatening to crimp a rebound from recession as protests damp local consumption and investment while weakening the currency. (Bloomberg) SOUTH KOREA FSC announces plan to improve short selling regulations The FSC has indicated that it will revise the relevant laws and regulations in order to implement the measures as soon as possible. The FSC intends to revise the Capital Markets Act in the first half of 2014 to implement the measures relating to the disclosure of investors' short selling positions and improvement of the current short-selling disclosure regulations. Korean government to ease foreign exchange transaction regulations The Ministry of Strategy and Finance (MOSF) has announced that the Korean government will ease regulations regarding foreign exchange transactions. The decision is intended to expand the scope of foreign exchange transaction related businesses by non-bank financial institutions and promote the use of the won in foreign exchange related settlements. INTERNATIONAL FSB publishes its Global Shadow Banking Monitoring Report 2013 The FSB published on 14 November 2013 the results of its third annual monitoring exercise to assess global trends and risks of the shadow banking system. UNITED STATES Fed Ponders How to Temper Tapering Without Rate Increase One of Janet Yellen’s first challenges as Federal Reserve chairman will be figuring out how to cushion against a lurch in interest rates when she pares the pace of the central bank’s bond buying. (Bloomberg) Yellen Signals She’ll Continue QE Undeterred by Risk of Bubbles Janet Yellen indicated she’ll press on with the Federal Reserve’s unprecedented monetary stimulus until she sees a robust recovery, downplaying risks the policy is inflating asset bubbles. (Bloomberg) CFTC to shake up US swaps trading market New guidance from the main US regulator of privately negotiated derivatives is set to test the business models of interdealer brokers, who have long played a crucial intermediary role between global banks. (FT) CFTC Passes Collateral Rule to Backstop Treasuries in Swap Trade The U.S. Commodity Futures Trading Commission approved a rule aimed at ensuring that Treasuries pledged as collateral for swaps and futures trades can be instantly converted to cash. (Bloomberg) France-USA agreement on implementation of FATCA signed | (French only) France and the United States of America have signed an inter-governmental agreement (model 1) for the purposes of the Foreign Account Tax Compliance Act and more generally for the purposes of combating tax evasion. EUROPE Draghi Says ECB Satisfied With State-Aid Rules After EU Response European Central Bank President Mario Draghi said the European Commission has addressed the ECB’s concerns about new rules that would require junior bondholder losses at banks that receive state aid. (Bloomberg) EU Lawyers: EBA Can't Bind Commission on Bank Resolution The European Commission’s proposed bank resolution system shouldn’t be bound by European Banking Authority decisions, lawyers for the European Union’s 28 member states said. (Bloomberg) ESMA begins preparatory work for new Market Abuse Regime The European Securities and Markets Authority (ESMA) has published a Discussion Paper setting out its initial views on the implementing measures it will have to develop for the new Market Abuse Regulation (MAR). German parties urge FTT covering stocks, bonds, FX, derivatives German parties discussing policies for a coalition government are urging the rapid implementation of a financial transactions tax among EU countries, covering stocks, bonds, currencies and derivative contracts. (Reuters) Trade repository competition not ideal, agree DTCC, CME Newly licenced trade repositories (TRs) may pull out of the market in the near future because of its unprofitable nature, delegates heard at the Mondo Visione Exchange Forum. (Trade News) EU set for battle over rules for securities markets A battle over the rules governing Europe's stock, bond, commodities and derivatives markets rachets up next week when the EU's financial services chief pushes for stricter controls which some member states say risk driving business away. (Reuters)