Huijin bonds to finance banks
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Central Huijin Investment's unprecedented bond issuance to finance three State-owned banks' rights issuances could further tighten inter-bank capital and push up market rates, experts said Wednesday.
Central Huijin Investment, the domestic arm of China's sovereign wealth fund China Investment Corp (CIC), plans to issue at least 120 billion yuan ($17.7 billion) in bonds, Reuters reported Tuesday citing three unnamed sources.
China Construction Bank, Bank of China, and the Industrial and Commercial Bank of China all announced to issue more shares to increase capital for meeting regulator's requirement on capital adequacy ratios.
As their largest shareholders, Central Huijin will have to finance up to 99.3 billion yuan ($14.65 billion) to maintain the same stakes in the three large State-owned banks.
After last year's loan bonanza, most major banks have been rushing to boost cash reserves.
Central Huijin was also assigned by the State Council to inject 50 billion yuan ($7.37 billion) to the Export-Import Bank of China and China Export & Credit Insurance Corp last September, according to media reports.
The total funds needed therefore would be about 150 billion yuan ($22.12 billion).
"We have no official statement ready to comment on this," said Jiang Daguang, public relations for CIC, adding that he had not heard the news yet.
"This is the first time that Huijin will issue bonds, if it's true," said Zhang Youxian, an analyst at the Bank of China's Institute of International Finance.
The issuance will be conducted on the inter-bank market, where large institutional investors such as securities firms, insurers, and financial companies make trades.
The inter-bank market is still tight following the regulator's control on capital adequacy ratio and controlled lending quota, said Zhang adding that the large value of bonds could further lower the liquidity of the market.
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