Shanghai bourse set to curb trading of high-risk bonds
Print Edition
THE Shanghai Stock Exchange will impose restrictions on trading of high-risk bonds to shield retail investors from risky high-yield investment.
Bonds issued by companies that posted a loss the previous year will carry an “ST” designation — or Special Treatment — as a sign of warning, the exchange said yesterday. That’s identical to the ST label already applied to stocks of unprofitable companies trading on the bourse.
The bourse also raised the bond investment threshold so that individual investors must have at least 5 million yuan (US$813,000) in financial assets to trade ST bonds. The new rules take effect on September 1.
The bourse said companies with legal or compliance issues and operational problems that affect their ability to make repayment will also have to carry the ST tag for their bonds. Bonds rated AA- or below will also be tagged with the ST label, the exchange said.
The new curbs come as the number of bonds listed on the bourse has hit record highs repeatedly, with rising credit risks, the exchange said.
Earlier this year, Shanghai Chaori Solar Energy Science & Technology became the first Chinese firm to default on its onshore corporate bonds after failing to make full interest payments on its Shenzhen Stock Exchange-listed bonds. It was a landmark default that exposed the risks in the country’s debt capital markets.
But the bourse’s curbs may not have any major impact on China’s debt market immediately. The Shanghai exchange had 1.72 trillion yuan in outstanding bonds at the end of 2013, a fraction of the country’s 30 trillion yuan onshore bond market.
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