Huijin Issued Bond Financing News Spread Like Wildfire &Nbsp; Location Uses Suspect.

Low profile Central Huijin has recently become the focus of investment agencies.

There is only one topic:

The news is that the Central Huijin Investment Company will issue RMB bonds of 80 billion yuan ~2000 billion in the interbank market.

"Huijin has just sought an insurance Asset Management Co in recent years, and is in touch with the issue of bonds."

A market source told reporters.

Because of its large scale, the source said that it was likely to issue in batches and the initial scale would be estimated at around 40 billion yuan.

Market participants also predict that Huijin debt may be between 10 and 15 years, referring to the yield of policy financial bonds, the interest rate of 10 years is about 3.5%, and the 15 year is 3.7%.

A supervisor told reporters of "financial and Economic Weekly" that in his view, Huijin issued bonds more "strange", "strange" is that the nature of Huijin debt is difficult.

At present, the NDRC is responsible for approving the issuance of corporate bonds, but so far Huijin debt has not gone through the procedures of the NDRC, and the market participants believe that this means that Huijin debt will tend to belong to the central bank's financial debt.

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However, the definition of financial holding company in China is vague and lacks corresponding legislation and supervision.

To clarify Huijin's identity, it is impossible to bypass the more important issue of financial state assets supervision.

Only when there is a clear institutional arrangement for the supervision of state-owned assets, will Huijin's position and Huijin debt be clarified.

Huijin, founded in 2003, is a wholly state-owned limited liability company established by the State Council. It is responsible for equity investment in state-owned key financial enterprises. The amount of capital contribution is limited to the representative state according to law to exercise the investor's rights and fulfill the obligations of investors.

After its establishment, Huijin has injected several large state-owned financial institutions several times, and in 2010 it said it would participate in the refinancing of several big state-owned banks.

It is widely expected that the purpose of Huijin's bond financing is to participate in the refinancing of the big banks, and the two is to finance policy financial institutions in the future.

Some analysts pointed out that Huijin financing by issuing the debt market means it has positive significance.

"A few big state-owned commercial banks in the year after the state capital injection reform, listing, is to promote the market reform, and now the big banks need to refinance, it is impossible to make another round of capital injection, that is a retrogression."

However, the positioning of the Huijin debt is quite controversial.

One view is that Huijin is a temporary institution established for the pformation of state-owned commercial banks. Another view is that it is a tool company for the State Council to maintain financial stability, prevent and defuse financial risks.

Therefore Huijin debt can not be simply equated with financial debt.

"Financial and state weekly" has reported that "improving the management of state-owned financial assets" is one of the important subjects before the national financial work conference in 2010.

According to "financial and Economic Weekly" reporter, the Ministry of finance, as the leader of the research group, has called the relevant departments to discuss this issue several times, but because of the huge interests involved, it is difficult for all parties to reach an agreement, and the Ministry of finance has not made a clear statement.

The foregoing regulators believe that Huijin should be defined as a financial holding company. However, under the current environment of domestic separate operation, the legal status and nature of financial holding companies are not clear, neither explicit prohibition provisions nor explicit provisions are established, let alone supervision.

Liu Yuhui, director of the center for economic evaluation of the Chinese Academy of Social Sciences, said that no documents were explicitly identified for Huijin.

Issue dispute

Economist Xie Guozhong told the financial and Economic Weekly that Huijin's main issue is to refinance banks and maintain their shareholdings in banks.

According to public figures, market participants have calculated that if Huijin's shares are not diluted after the refinancing of these banks, Huijin needs at least 100 billion yuan in issuing bonds.

Huijin issued a number of announcements in 2010, saying that it would actively support the three industries, including China, China and construction, to take refinancing, including rights issue, and has offered a letter of commitment to Bank of China and CCB to subscribe for its rights issue shares in cash.

In this regard, Xie Guozhong said that Huijin issued bonds to participate in the issue of shares, "equivalent to the state borrowing and holding bank stocks, from the banking system, there is no risk, and ultimately there is a state guarantee."

For Huijin, "the risk of Huijin issuing bonds to buy stocks is just like that of ordinary people borrowing money to buy stocks."

Huijin's main source of income is dividends from its share holding financial institutions.

According to Wind data, by the end of 2009, the cumulative cash dividends of ICBC, CCB and BOC were about 161 billion 665 million yuan, 107 billion 777 million yuan and 104 billion 74 million yuan, respectively, totaling about 373 billion 516 million yuan.

According to the three annual 2009 annual report, as of the end of 2009, Huijin's stake in ICBC, China Construction Bank and Bank of China was 35.4%, 57.09% and 67.53% respectively. Based on this rough calculation, Huijin's total accumulated dividends from three major businesses amounted to about 189 billion 40 million yuan.

A banking researcher of a large brokerage firm told reporters that Huijin's annual dividend can cover the interest generated by issuing bonds.

Once Huijin's debt issuance program in the interbank market is "landing", commercial banks and insurance companies will become the main buyers, which means Huijin will borrow money from banks and take part in the refinancing of banks.

Guo Tianyong, director of the China Banking Research Center at Central University of Finance and Economics, said that this practice is not surprising. Similar events have long been precedent. In 1998, when the financial reform was carried out, the Ministry of finance also issued hundreds of billions of special treasury bonds to inject commercial banks.

He believes that there are no institutional barriers for several major banks to buy Huijin bonds, so if Huijin issues bonds, several major banks will rush to buy them.

But there are still voices of doubt in the market.

An expert who declined to be named said that at the recent meeting of the safe meeting, participants questioned the issue of Huijin's RMB bonds: "CIC's overseas investment return rate was 11.7% in 2009, and Huijin's investment income must be higher.

At present, the amount of foreign exchange reserves is huge. Why not continue to allocate foreign reserves to Huijin, and then invest in several major banks? "He suggested that we could afford another 100 billion US dollars of foreign exchange, which will be injected into several major banks by Huijin, which not only alleviates the pressure on foreign exchange reserves, but also enables us to maintain and increase foreign exchange reserves.

Repercussions vary.

For the upcoming Huijin bonds, some investors in the market show a strong desire to buy.

"If the CIRC allows us to buy, we are very willing to buy Huijin debt."

The head of the investment department of a joint venture insurance company said, "we prefer medium and long term bonds."

According to the regulations of the CIRC, only a few insurance companies that have established Asset Management Co can purchase Huijin bonds.

Since 2010, the premium income of insurance companies has increased rapidly, facing greater investment pressure.

People close to the Insurance Regulatory Commission said that the CIRC will not issue a special opinion on Huijin debt, and the key is to see how to quantify Huijin debt.

"If it is corporate debt, it will go according to the management method of corporate bonds. If it is financial debt, it will go according to the way of financial debt, and it will not be so fine."

As an important investor in the interbank market, insurance companies will affect the issuance of Huijin bonds.

According to the reporter, several large insurance companies have received inquiries about the issue price and duration preferences of Huijin debt.

A reporter close to Huijin bond underwriter told the finance and economics weekly that whether banks with equity relations with Huijin can buy, and ultimately depends on disclosure.

He disclosed that the disclosure of Huijin bonds would provide investors with regulations. If a few large banks could not buy or buy a relatively small proportion, the purchase of the main force could only rely on large insurance institutions.

In Liu Yuhui's view, "Huijin issued long-term bonds is very popular."

He believes that the current monetary easing, while the long-term interest rate is low, and there is a credit window guidance, the entire banking system is full of funds, and also hope to configure the medium and long-term bonds.

A person close to the Ministry of Finance said that in the interbank market, institutional investors had huge amounts of money and the entire market should be able to bear it.

The insurance companies also say that the number of institutional investors in the interbank market is huge. Even if the funds of the city commercial banks and the rural credit cooperatives are concentrated, the energy can not be ignored.

However, the attitude of some rural credit cooperatives to Huijin debt is very calm.

"Huijin debt is the first issue, liquidity may not be very good, so we will not participate temporarily."

A head of the Fund Department of a rural credit cooperative told reporters that although there is not enough prosperity at present, the interest rate will always increase in the future. If the liquidity is not good, it will affect the adjustment of future positions.

(source: finance and economics weekly: Wang Chunxia Xiong Feng)