China requires new private corporate bond issues to come with CDS -sources
By Xiaochong Zhang and Noah Sin
BEIJING/HONG KONG, April 17 (Reuters) - China's securities
regulator has asked brokerages to insure new bonds from private
companies with credit default swaps (CDS), a move aimed at
helping firms struggling to raise funds to come to the market,
several sources said on Wednesday.
However, companies rolling over old bonds will not be
affected, the China Securities Regulatory Commission (CSRC) said
in unofficial guidance, sources said.
Brokerages that are not licensed to issue CDS may be
required to apply for that status through licensed brokers, the
If a new bond is not paired with a CDS, exchanges hosting
that bond will need to explain the absence of CDS to the
securities regulator and seek approval, the sources said.
The CSRC did not immediately respond to Reuters' request for
CDS contracts are insurance against default and are a
relatively new product in China.
"This guidance means that new issuance by private
enterprises, new bonds will need to be matched (with CDS),
regardless of the use of proceeds," said one source close to the
Shanghai Stock Exchange.
"This is basically a compulsory requirment. CDS may not be
required to roll over old bonds. New bonds will be required (to
use CDS)," said a source close to the Shenzhen Stock Exchange.
There are currently eight Chinese brokerages licensed to
issue CDS: Citic Securities, China Securities
, China International Capital Corp, Huatai
Securities, Haitong Securities, China
Merchants Securities, GF Securities and
Guotai Junan Securities.
(Reporting by Xiaochong Zhang and Noah Sin; Editing by Tony
Munroe and Louise Heavens)
First Published: 2019-04-17 13:55:50
Updated 2019-04-17 15:17:29
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