Hong Kong Issues Virtual Banking License

Hong Kong’s monetary authority issued three virtual bank licenses to companies backed by mainland tech giants and financial institutions.

The Hong Kong Monetary Authority, the special administrative region’s de facto central bank, said Wednesday the licenses would take effect March 27, and services will be officially launched within the next six to nine months.

The issuance of virtual bank licenses is a key step for Hong Kong to move toward a new era of smart banking to enhance the city’s position as an international financial hub, said HKMA CEO Norman Chan Tak-lam. Winners of the first licenses are Livi VB Ltd., SC Digital Solutions Ltd. and Zhongan Virtual Finance Ltd.

Zhongan Virtual Finance was set up by Sinolink Group and ZhongAn Online P&C Insurance Co. Ltd., which is backed by Alibaba Group Holding and Tencent. The company said it is set to roll out its first batch of financial products by the end of the year.

Livi is a joint venture formed by Bank of China (Hong Kong) Ltd., Beijing Jingdong Financial Technology Holding Co. — the financial technology arm of e-commerce giant JD.com — and British conglomerate Jardine Matheson Holdings Ltd.. Livi is expected to start online banking services in the next six months.

SC Digital is funded by Standard Chartered Bank, PCCW Ltd., Hong Kong Telecommunications Ltd. and Ctrip Finance, the fintech unit of Ctrip.com International Ltd. Standard Chartered said the virtual bank will be integrated with other services of PCCW, HKT and Ctrip, providing a wide range of retail financial services and products.

China Railway’s Debt Reaches New High

The debt of State-run China Railway Corporation reached 300 billion yuan ($44.68 billion) in 2018, far exceeding the planned 240 billion yuan in 2018, an increase of 25 percent.

The report added that national railway investment in 2019 is expected to exceed 800 billion yuan, a record high. According to the NDRC, China plans to start construction of 26 railway projects and another 19 reserve projects this year.

The total amount of railway bonds issued in 2018 was 240 billion yuan, accounting for about 30% of the annual railway investment, according to report. The national railway fixed asset investment stood at 802.8 billion yuan in 2018, higher than the 732 billion yuan planned, Shanghai Securities News said on Friday, citing sources. It was the fourth consecutive year since 2015 in which fixed asset investment breached 800 billion yuan.

The report said that aside from railway construction investment, the NDRC has approved a series of projects such as urban rail and airport construction with total investment of more than 1.2 trillion yuan since the fourth quarter of 2018. Moreover, local governments are accelerating the pace of investment in infrastructure construction, and their funds are also partly derived from bonds.

Mega IPO HK Que

State-owned China Tower ,which operates the telecommunications towers for mainland China telecommunication companies, raised at least HKD54.3 billion (USD6.9 billion) in its IPO today.

China to Lower Bank Reserve Ratio

China’s central bank the People’s Bank of China (PBOC)  said on Tuesday it will cut the bank reserve requirement ratio (RRR) – currently at 17% for large institutions and 15% for smaller banks – by 100 basis points (bps).

The cut is effective on April 25 and applies to most banks, with the exception of policy lenders such as China Development Bank.

 

HK Retail Sales Distorted By Holiday

Hong Kong’s retail sales grew at its weakest in three months in January, in value terms, due to a decline in tourist arrivals from mainland China and new year holiday distortions. The Lunar New Year fell in January last year but was in February this year. Retail sales in 2017 rose 2.2% in value terms over 2016, ending a three-year slump in the sector.
January tourist arrivals slid 2.6% from a year earlier to 5.33 million, ending four straight months of growth, according to the Hong Kong Tourism Board. Mainland visitors, which accounted for 77% of the total, fell 5.5% on year, in their first drop since August last year.    The total number of visitors increased last year, rising 3.2%, after declining in 2015 and 2016. Of those, mainland visitors were 3.9% higher than in 2016.

 

China Tech Giant Seeks Billion in USD Bond Rush

China tech giant joins USD bond rush run in the latest week. China’s tech firm Tencent was selling four tranches of bonds worth USD 5 billion on Jan. 19, according to the company’s announcement a week earlier.

 

The 4 tranches include 5-, 10-, and 20-year fixed-rate bonds at 2.985%, 3.595%, 3.925% respectively, and 5-year floating-rate bonds at 0.605% over three-month LIBOR.

 

The bonds selling plan is part of the company’s USD 10 billion medium-term bonds issuing plan announced in the previous week, according to China Xinhua News, “the global rating agency Moody’s has assigned a rating of A2, meaning low risk of default, to the Tencent bonds. The rating is one level below China’s business titan Alibaba’s bonds, issued last November”.

 

-Agencies

 

 

 

4T Corporate Debt Coming Due in China- Report

Chinese companies must repay 4 trillion yuan (USD614 billion) of bonds coming due this year, according to securities firm research. Chinese companies has an aggregate RMB 4 trillion coming due in 2018 and investors may also exercise options to sell an additional RMB 910 billion of securities back to issuers, Bloomberg reported citing Huachuang Securities research. There is a high probability investors who have options to sell back to property developer as well as local government financing vehicle bonds will do so, the report says.

 

– Agencies

Hong Kong Trade Deficit Widens

Hong Kong’s foreign trade gap widened in November from a year ago, as imports grew faster than exports, data from the Statistics Department showed Thursday.

 

The visible trade deficit rose to HKD39.7 billion in November from HKD34.05 billion in the corresponding month last year. The shortfall was declined from HKD43.96 billion in October.

 

Exports climbed by 7.8% while imports climbed 8.6%, respectively in November from a year earlier.

 

– ACMR and agencies

S&P Lowers Hong Kong rating following China downgrade

Standard and Poor’s has cut its long-term rating on Hong Kong, following its cut to China’s sovereign credit rating , to reflect “spillover risks” to the territory.

 

S&P lowered its long-term rating on Hong Kong to AA+ from AAA  after it cut its credit rating on China. The ratings agency cited rising economic and financial risks in China following a prolonged period of strong credit growth as reasons for it cutting its rating on the world’s second-largest economy.

 

Strong institutional and political ties exist between China and Hong Kong, arising from the latter’s status as a Special Administrative Region of China. Consequently, we view a weakening of credit support for China as exerting a negative impact on the ratings on Hong Kong beyond what is implied by the territory’s currently strong credit metrics.

Hong Kong- China Kicks Off Bond Connect Program

The central banks of China and Hong Kong said on Sunday said non-mainland investors can start trading mainland China’s bonds in a trial beginning on Monday.

 

Trading will initially be “Northbound”, so it will be non-mainland investors to buy and sell China debt.