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Three domestic securities houses were allowed to issue bonds on March 1, the first time Chinese authorities have given securities businesses the go-ahead to try the financing tool.
CITIC Securities, Haitong Securities and Greatwall Securities have been approved for bond issuance scales of up to 1 billion yuan (US$120.7 million), 3 billion yuan (US$362.3 million) and 230 million yuan (US$27.8 million) respectively, said a communique released on March 1 by the China Securities Regulatory Commission (CSRC), the industry watchdog.
The approved volume is based on the companies' asset scale, the release said.
A CSRC regulation issued last September said that the volume of bonds to be issued by a securities company cannot exceed 40 percent of its net asset.
All of the three bonds approved this time are expected to be sold to qualified investors with a five-year term and full guarantee.
"We can foresee that issuing corporate bonds, as a lawful long-term financing channel, will be an important funding resource for securities companies," the CSRC news release stated.
More qualified securities companies will be allowed to raise funds through issuing bonds at a later stage, it said.
Several other securities firms have also applied to issue bonds, including China Galaxy, Guotai & Jun'an and Orient, insiders said.
"We just received the approval from the CSRC, which asked us to prepare and start the bond issuance within a month," a spokeswoman with CITIC Securities said.
"We've been preparing for that for a long time and surely we would like to make the final move as early as possible," she said.
The bonds will be sold to a limited group of investors and subscription will be carried out in a private manner, she said.
CITIC Securities is one of the few securities houses listed in China. The bond issuance will further increase its fund adequacy.
Investors have been waiting for the news for a long time. Now the market talk will finally become a reality, said Wang Yuanhong, a senior researcher with the State Information Centre, an influential government think-tank.
The State Council issued a document in February to reiterate the strategic importance of the capital market and pledged to take concrete measures to increase direct financing and allow more qualified institutional investors to enter the bourses.
The approval to launch the issuance of bonds is a positive first step to implementing the new policies, said Wang.
And, he said, the fund supply seems sufficient.
When securities houses receive more funding through bond issuance, investors will also be exposed to more investment channels, he said.
(China Daily March 2, 2004)
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