Daily Dim-sum Set 2015-12-28

First of all, we wish our readers a Merry Christmas and a great 2016! Hope you and your family can achieve whatever goals they endeavor in the coming year.

To increase our readers’ attachment to our website, we have rolled out a new daily section called “Daily Dim-sum Set”, which covers major business, policy, corporate and cultural news in China, deriving from various sources. We hope you can enjoy digesting the set menu we prepared for you and treat it as a fine combo of information. And here it comes for today, December 28th, 2015:

Market appetizer:

  1. Shanghai Stock Index slumped 2.6 percent due to B-share debacle (http://www.bloomberg.com/news/articles/2015-12-28/chinese-stocks-fall-in-hong-kong-on-industrial-profit-telecom)

Commentary: the power of the Fed rate hike has yet to be felt until today. Slump in B-shares shows onshore USD liquidity drain, a key concern for FX regulators going ahead. That said, B-share has been overlooked by onshore investors for quite a while, which leads to a question: is it the right time to close the B-share market? (Chart source: Google Finance)

B-share.PNG

2.  Mild depreciation outlook for RMB in the coming year (http://www.fxstreet.com/news/forex-news/article.aspx?storyid=c16b6378-001b-4952-8685-e7d71ec46e3c)

Commentary: The PBOC, China’s central bank, has been trying to “send some feelers out” for quite a while. Yet a depreciation bias is not an option for China, as it neither will help the exports gain competitive advantage, nor will it prevent the ongoing slump in the industry sector.

Policy bun:

  1. A basket of laws and amendments have been enacted during the final NPC session of the year 2015 (http://news.xinhuanet.com/english/2015-12/28/c_134956093.htm), including anti-terrorism law, revised law on Population and Family Planning, counter domestic violence law, stock listing reform, reform on higher education, etc.

Commentary:  A series of law and amendments reflect the fruits of the reform since the Fifth Plenary Session of the 18th Party Congress, echoing President Xi’s resolve to implement “genuine rule of law” as the pillars of the reform. The counter domestic violence law have been positively received by the public, due to numerous incidence in the past where the victim cannot be protected from reckless domestic violence. (Lawmakers in session, source: Xinhua)134956093_14512532255371n.jpg

2.  PBOC unveils final version of online payment regulation -(http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/2996543/2015122817344044611.pdf, in Chinese only)

Commentary:  Online payment account is not included in deposit insurance scheme of the PBOC, and it has been classified into three types of account with maximum quota of 1000, 100k and 200k RMB(if the account is linked with online banking, then there is no such limit). The regulation shuts the door for new entrants of online payment to ramp up rapidly, whereas existing players will continue the game of thrones, until the winner is singled out of the race.

3. CBRC rolls out preliminary draft of P2P platform regulation – (http://news.xinhuanet.com/finance/2015-12/28/c_128574703.htm, in Chinese only)

Commentary: A negative list was drawn out for P2P platforms, including no crowdfunding, no guarantee, no sales of asset management plan, no offline channels, etc. More risk management-related rules were also drafted, including detailed disclosure of volume, NPL, concentration, due loans, etc. More importantly, P2P platforms need paid registered capital of 10 million RMB, closing the doors for smaller entrants. P2P platforms were also banned from entering the stock market, showing the macro prudence of regulators on the top level. It will end the era of “gilded age” for Chinese P2P platforms, where strict regulation was non-existent and incidents of Ponzi Scheme were rampant.

Corporate dessert:

  1. Petrochina was restructuring its pipeline asset, worth around 300 billion RMB in asset value (http://www.bloomberg.com/news/articles/2015-12-24/petrochina-puts-sprawling-pipeline-assets-in-12-billion-company). NSSF, Taikang, Baosteel, and New China Life were among the post-restructuring investors.

Commentary: A part of the ongoing energy reform, the divestiture will truly achieve “the separation of pipeline with network” stipulated by the government’s macro plan. From an investment perspective, high transmission cost limits the ROE of the asset, but is still acceptable for insurance companies and SOEs as a long-term passive investment.

2.  Deutsche Bank and Sal Oppenheim are selling its stake in Huaxia bank to PICC Property (http://in.reuters.com/article/idINL3N14H2RR20151228)

Commentary:  Selling at roughly 1.1x book value might not be the best outcome, but it has earned hefty returns along with the macro growth. Regrettably, little strategic input has been made towards Huaxia, which might be a fate of typical Western-Chinese marriage.

 

3. Shunfeng Express, China’s DHL, is rumored to have announced massive layoff plans in various departments (http://it.people.com.cn/n1/2015/1228/c1009-27983270.html, Chinese only)

Commentary: Intense price war and failed O2O strategy might have been the trigger, but it might also be an industry norm this year.

 

 

 

 

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