Bond market happy as 13-year ban ends
By Zhang Fengming |
October 28, 2010, Thursday
|
Print Edition
Print Edition
CHINA yesterday allowed banks to trade bonds on stock exchanges under a trial program as it ended a 13-year ban.
"The trial program is in line with China's promotion of a direct financing segment and will help lenders to better allocate their assets by making use of the stock market and the inter-bank market," said the People's Bank of China, China Banking Regulatory Commission and China Securities Regulatory Commission in a joint statement yesterday.
Observers said the bond market will welcome the trial program since banks can bring liquidity to the market, which is key for its development.
Bank lending still dominates financing channels in the country - a reason why the authorities are opening new channels to help companies access more financing options and trim risks for banks. Outstanding bank loans in China were more than twice the size of debt securities at the end of last year.
China's bond market is divided into two parts - bonds listed on stock exchanges that are traded by individuals and fund management firms; and bonds traded on the interbank market, which is open to institutional players like banks and other financial firms.
In 1997, China banned lenders from trading debt on stock exchanges after they channeled money into risky products and were hit with big losses. The capital market has been improving steadily over the years, which laid a sound base for the resumption of the bond market to lenders.
"The trial program is in line with China's promotion of a direct financing segment and will help lenders to better allocate their assets by making use of the stock market and the inter-bank market," said the People's Bank of China, China Banking Regulatory Commission and China Securities Regulatory Commission in a joint statement yesterday.
Observers said the bond market will welcome the trial program since banks can bring liquidity to the market, which is key for its development.
Bank lending still dominates financing channels in the country - a reason why the authorities are opening new channels to help companies access more financing options and trim risks for banks. Outstanding bank loans in China were more than twice the size of debt securities at the end of last year.
China's bond market is divided into two parts - bonds listed on stock exchanges that are traded by individuals and fund management firms; and bonds traded on the interbank market, which is open to institutional players like banks and other financial firms.
In 1997, China banned lenders from trading debt on stock exchanges after they channeled money into risky products and were hit with big losses. The capital market has been improving steadily over the years, which laid a sound base for the resumption of the bond market to lenders.
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